Direct electronic invoicing could lead to considerable cost savings (maybe even as much as 75%) and an optimisation of the overall billing process. Because paper records would become superfluous, the cost of preparing and sending invoices would be eradicated.
Many organisations have already taken their first steps into e-business (e.g. electronic ordering, electronic payments, ERP, e-procurement, public key infrastructure, purchasing cards, etc.), but until now the tax authorities have insisted that records must be kept on paper. The reasoning behind this was that it was otherwise impossible to sufficiently guarantee the authenticity of the origin and the integrity of the contents of an invoice. The invoice is one of the most important documents in the commercial world. It even serves as a vehicle for VAT. Invoices allow businesses to set off input tax against output tax, they provide information on what VAT rules apply to a given transaction and they constitute hard evidence during audits by the tax authorities. Businesses are under a legal obligation to send invoices for all supplies of products or services.
Until now, businesses could only send electronic invoices with special dispensation from the tax authorities. Even then, it was obligatory to keep regular records in the form of paper reconciliation statements. These are a record of more or less all the information that is found on a normal paper invoice. Apart from the speed, any other benefits of the electronic invoice were therefore cancelled out.
Now, though, anyone can send electronic invoices as long as they meet certain requirements. Requirements have been put in place to guarantee the authenticity of the origin and the integrity of the contents of the invoice. There are three possibilities. Variant 1 is however the most notable of the three situations as it utilises an advanced electronic signature. This variant differs greatly from the situation to date and consequently offers the greatest benefits.
Variant 1
The origin and the integrity of the invoice are guaranteed by an advanced electronic signature. The electronic signature must meet the following requirements:
- it must be uniquely linked to the signer;
- it is capable of identifying the signer;
- it is created using means that the signer can maintain under his sole control;
- it is linked to the data to which it relates in such a manner, that any subsequent change of the data is detectable.
In practice, this means that any business wanting to send electronic invoices must have the ability to sign them electronically. This requires a number of resources, the most important of which is that the signer has access to advanced cryptography software that can work with key pairs. The issuer of the invoice uses his private key to sign the invoice (this key must be kept safe), while the public key is used by anyone wanting to verify the authenticity of the signature.
Variant 1 requires the encryption software to be integrated with the existing invoicing software. An important point to note, is that invoicing only requires you to have an encrypted digital signature. However, there is the "certified digital signature", which is an encrypted digital signature accompanied by a qualified digital certificate. A document signed with a digital signature (certified) is recognised in law and can therefore be used for contracts and such like. As stated above, this certified signature is not really necessary for an invoice.
PricewaterhouseCoopers N.V. can be of assistance with all aspects of the introduction of the digital signature and the ensuing organisational changes that may be required.
Variant 2
Variants 2 and 3 are less of a departure from the current situation. However, this also means that they offer fewer benefits. Discussion of these variants is therefore limited.
If invoices sent electronically are not digitally signed, their origin and integrity must be ensured by a paper reconciliation summary. This is basically a list of invoice recipients and the invoice totals per calendar month printed on the headed note paper of the business. The reconciliation summary must include all the information that is required by law to be included in an invoice. The summary must be sent at least once a month by the invoicing party and must be kept by the recipient.
The benefits of this variant are mainly the increase in speed and ease at the time of invoicing. Nevertheless, the paper reconciliation still requires (almost) the same efforts as with an entirely paper-based system.
Variant 3
It is also possible to set up an electronic invoicing system other than those described in variants 1 and 2 above. However, the ability to guarantee the origin and the integrity of the electronic invoices remains an essential requirement. The Under-secretary of State has stated that it is advisable to contact the tax authorities before using any method other than the advanced digital signature or the paper reconciliation summary.
Although prior consultation with the tax authorities is not compulsory, the situation in variant 3 is basically the same as the situation in the past. Electronic invoicing was available, but only with the prior permission of the tax authorities. The saying "better safe than sorry" would seem to apply here. It would seem inadvisable to set up your own electronic invoicing system without consulting with the tax authorities first.
Keeping of records
Not new but still important is the keeping of records. The obligation to keep your records for seven years ( 10 years for investments in real estate) applies equally to paper and electronic invoices. When considering an electronic invoicing system, it is crucial that you look at how data is stored and accessed.
Conclusion
The VAT experts can assist you in implementing an electronic invoicing system and electronic data storage. Because we work closely with Global Risk Management you can rest assured of a seamless technical and financial migration to electronic invoicing.
For more information please contact Stan Beelen at (++31)(0)30 219 19 40 or Marco LubbelinkHof at (++31) (0)10 407 56 15. You can also send an e-mail to natasja.op.den.kamp@nl.pwc.com for further information.
Source: Decree of the State Secretary of Finance, 20 April 2001, nr. CPP 2001/1104M
