BillingBusiness Guidelines

Electronic Invoice – Everything you Need to Know

The law allows the use of new technologies to provide greater efficiency and security to the traffic of documents, here being the object of analysis the electronic invoice, a modality of presentation and receipt of invoices that complies with the law and that has the same effect as printed or digitized invoices.

What is the Electronic Invoice?

We can define the electronic invoice as a digital document, equivalent to the traditional invoice, but which is presented through standardized electronic means and procedures. The peculiarity of electronic invoices lies in the validation of your data (generally by electronic signature), and the delivery through digital means (automated files).

Electronic invoices fulfill the same purpose as conventional invoices (in digital document format or printed on paper) since they also contain the complete data of the issuer and receiver, and information on the concept to be invoiced (with its price, tax rates, and tax withholdings, if applicable). The electronic invoice format is perfectly structured.

Is an Electronic Invoice a digitized invoice?

No: it is important to clarify that a digital invoice is not a PDF document (or similar). Digital documents are not electronic invoices, since they have the same consideration as conventional paper invoices.

Electronic invoices, as we said previously, have a method of verifying their integrity so any electronic invoice that is modified after being digitally signed will lose said validation mark, being necessary to verify its integrity and sign it again.

Where is the Electronic Invoice Implanted?

Mandatory in the Public Sector

In April 2019, the transposition of the European directive 2014/55/EU obliged all public administrations of the EU member states to have all possible means to process electronic invoices with a standardized format (EN16931).

This means that electronic invoicing is currently not a mandatory element for the private sector, limiting its scope of application to the public sector: private companies have no obligation to implement systems for issuing, processing, or receiving electronic invoices.

These efforts from the European government bodies are intended to give extra transparency to the operation of public administrations, as well as to fight against tax avoidance and tax fraud, a practice that costs millions of governments in Europe (and the world).

Optional in the Private Sector

However, the private sector has been developing these systems long before public administrations: since 2002, specifically, when the EU established a legal framework under which commercial companies were able to start exchanging electronic invoices with the same legal guarantee as conventional invoices.

However, it is expected that the European Union, in the near future, will extend the scope of electronic invoicing outside the limits of official bodies and that these obligations will also bind both the business sphere and that of the final consumer.

In any case, the data tell us that the private sector is fully prepared to implement electronic invoicing on a massive scale in its procedures.

How does the Electronic Invoice Work?

  • It is essential to have a digital means of validating the invoice. This method focuses on the use of the digital certificate, which must be installed on the computer from which the invoice is to be issued or received.
  • In addition, it is necessary to have electronic invoicing software, a computer application through which these types of files can be generated and received: these must have a specific format if the invoices are destined for a public administration body.
  • With this application, the electronic invoice is generated and signed with the digital certificate, thus leaving the invoice ready to be presented to the corresponding entity or body, with a full guarantee of its legal validity.
  • It should be remembered that electronic invoices cannot be manipulated once they have been digitally signed: any alteration of their content would undo the validation process, so they will be required to be signed again after each modification.

The scope of electronic invoices is identical to that of traditional invoices since they are legally equivalent documents (as endorsed in the text of the Billing Regulations ); Its use has great advantages, such as agility in administrative procedures, link to payment systems, and prevention against fraudulent economic activities.

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Ahmed Ismail

I'm a Civil Engineer. I like reading everything related to Business so I decided to launch the "Fast Grow Company" website to help Entrepreneurs in their business journey. Keep updated and follow us.

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