A new definition of “electronic invoice” or “e-invoice” in EU VAT law would mean an invoice that has been issued, transmitted, and received in a structured electronic format which allows for its automatic and electronic processing. The new definition would introduce a level of uncertainty in respect of the continued use of some existing forms of electronic invoicing, such as .pdf invoices, and whether these would continue to constitute valid alternatives to paper VAT invoices.

With effect from 1 January 2024, if a member state requires businesses to issue structured electronic invoices, these invoices would be permitted to follow the European standard EN 16931. E-invoicing systems with mandatory pre-authorisation or verification of the e-invoices by the tax authorities could no longer be introduced, and any existing models would have to be phased out by the beginning of 2028. An important practical change is that suppliers wishing to issue e-invoices would, from a VAT perspective, no longer be reliant on the agreement of the recipient.

As from 1 January 2028, invoices would be issued in a structured electronic format. Member states would still be permitted exceptions, but not for those transactions that would be subject to e-reporting (see below).

VAT invoices would need to contain more information than currently required under the invoice content requirements laid down in Council Directive 2010/45/EU (the second invoicing directive). New elements include the supplier’s International Bank Account Number (IBAN) to which payment for the invoice will be made, the due date(s) for payment of the invoice, and, in the case of corrective invoices, the corrected invoice’s sequential number. The ability to issue summary invoices covering multiple supplies made during the same calendar month would be abolished, meaning that invoices would need to be issued on a transactional basis.

New obligations for taxpayers involved in intra-EU trade

The focus of the European Commission’s proposal is the implementation of a digital reporting requirement covering all intra-Community supplies and acquisitions, as well as for all business-to-business (B2B) services that are taxed in a member state other than that in which the supplier is established, and that therefore are subject to the reverse charge at the level of the recipient. This would cover both general B2B services rendered between taxpayers established in different member states, and also transactions subject to the domestic reverse charge for nonestablished suppliers, which would become mandatory as from 1 January 2025.

Invoices for supplies falling within the scope of this digital reporting must be issued no later than two working days after the chargeable event (typically the arrival of the goods or the completion of the service). Subsequently, a dataset containing most of the mandatory VAT invoice details would need to be transmitted on a transaction-level basis, no later than two working days after the invoice was issued (or should have been issued).

This transmission could be done by the taxpayer making the supply, or by a third party on the taxpayer’s behalf. The dataset would be provided to a national electronic portal that must allow the transmission of data from electronic invoices meeting the EN 16931 standard. This near real-time reporting is likely to be integrated into the commercial offerings from e-invoice service providers in the future.

The data transmission requirement would not be limited to the supplier of goods and services; taxpayers making intra-Community acquisitions also would be obliged to transmit data on their purchases. This would be a new requirement at the EU level, as only a small number of member states currently require European Purchase Lists (EPLs). As a consequence of the new reporting obligations from 2028, the European Sales (Purchase) Lists (ESL/ESPL) would be abolished.

To process the data collected on intra-EU trade, a central system for the exchange of VAT information (“Central VIES”) would be set up by the European Commission. This system would replace the current VIES that allows the exchange of data on cross-border supplies and on VAT registration numbers between EU member states.

The capability of the Central VIES would be significantly increased; it would be able to store data transmitted on cross-border operations, crosscheck information received on intra-EU supplies and acquisitions, aggregate data to make it available to national tax authorities by VAT registration number, and augment the data from the intra-EU transaction reports with other data sources like the customs surveillance system or the future Central Electronic System of Payment information (CESOP).

In addition to its reporting uses, the Central VIES system would also contain taxpayer’s VAT registration data provided by the national tax authorities’ databases. Member states would need to update this system immediately, and enter the data obtained on intra-EU transactions into their national portals within one day after receipt.

Access to the data in the Central VIES system would be limited to specific tax officials and national data systems, and would need to meet high standards in terms of data privacy and security. Taxpayers would remain able to access the VAT registration data of their counterparts, as is the case under the current VIES system.

Aside from broadening the scope of the current ESPL obligations to include transmission of transaction level data for intra-EU supplies of goods and services, the changes to the VAT directive also set out a strict framework within which member states could impose digital reporting requirements on their taxpayers for other transactions.

In the future, domestic digital reporting requirements could cover both B2B and B2C transactions performed by taxpayers identified for VAT in the specific member state. The systems that member states put in place would need to follow certain features of the intra-EU DRR, including reporting on a transactional basis, transmission of data to the tax authorities within two working days, and the ability to transmit data from structured electronic invoices according to the European standard and potentially other formats. Member states would have flexibility on other points, such as which data elements must be provided by taxpayers.

With this framework, the proposal aims to achieve a uniform approach across member states introducing domestic DRR to reduce the associated costs for businesses and groups active across the EU. Member states that will have implemented DRRs such as clearance e-invoicing or (near) real-time reporting before the entry into force of the new rules would need to adapt their systems by 1 January 2028. Going forward, member states could still impose additional VAT obligations on taxpayers to ensure accurate collection of VAT and to prevent evasion, but it would not be possible to impose additional invoicing obligations, nor to implement additional reporting obligations, over and above the EU and domestic DRR.