The introduction of the possibility or obligation of the electronic invoicing system that we have described in the previous article on e-invoicing is only the first stage of digitization. The next stage is obligatory e-invoicing between businesses and tax authorities is another aspect of mandatory e-invoicing that is becoming increasingly common worldwide. EU Tax Advice is presenting a series of articles on e-invoicing and this another one.
Under the obligatory e-invoicing system between businesses and tax authorities, businesses are required to submit electronic invoices directly to tax authorities. This enables tax authorities to verify the accuracy of invoices in real time and detect any potential fraud or tax evasion. In addition, it reduces the administrative burden on businesses by eliminating the need to file paper-based invoices and supporting documents.
Several countries have already implemented mandatory e-invoicing for tax purposes, including Brazil, Mexico, Hungary, Romania, Italy, and Turkey. The European Union is also planning to introduce a new directive on e-invoicing in public procurement, which will require public authorities to receive and process e-invoices from their suppliers. Not waiting for the relevant regulations, most EU countries are already working on a new e-invoicing obligation, and some countries including Poland, Belgium, France, and Denmark have already announced the introduction of a new obligation in 2024.
The benefits of obligatory e-invoicing between businesses and tax authorities are numerous. It helps to increase tax compliance, reduce the risk of fraud, and improve the efficiency of tax collection. In addition, it provides businesses with greater transparency and faster access to information on their tax obligations.
However, there are also challenges associated with mandatory e-invoicing for tax purposes. One of the main challenges is the need for businesses to adopt new software and hardware systems to support e-invoicing. This can be a significant expense, particularly for small and medium-sized businesses. In addition, there may be concerns around data privacy and security, particularly if sensitive financial information is being transmitted electronically.
Despite these challenges, the trend towards obligatory e-invoicing between businesses and tax authorities is likely to continue. Governments around the world are increasingly looking to e-invoicing as a way to improve tax compliance and reduce administrative burdens on businesses. As such, it is important for businesses to stay up-to-date with the latest developments in this area and be prepared to adopt e-invoicing systems if required by law.
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