Electronic invoicing is rapidly becoming a standard business process. Governments are pushing for the adoption of B2G invoicing to optimize the public procurement process and also to provide a boost to the adoption of e-invoicing between businesses.
Apart from countries that have introduced general e-invoicing mandates to improve fiscal controls – most of which have so far been in Latin America – countries in Europe and some in Asia are looking towards the PEPPOL framework to generate both business process and fiscal benefits through standardization.
PEPPOL was established to simplify interoperability, initially for public procurement transactions, but it is being built upon to encompass fiscal reporting or invoicing ‘clearance’ concepts as well.
B2G e-invoicing in Europe with PEPPOL
As part of harmonizing and digitizing public procurement processes within the EU, governments and other public bodies under Directive 2014/55/EU are required to be able to send and receive electronic invoices in accordance with the European Standard EN-16931.
All EU Member States’ public administrations had to be able to receive e-invoices at least for public procurement transactions either by November 2018 or by April 2019, with the possibility for Member States to extend the deadline by one extra year for sub-central authorities.
Several countries have taken the opportunity to generally mandate B2G electronic invoicing when implementing the Directive 2014/55/EU, so that both the public sector and private sector supplier will be obliged to send invoices electronically in B2G transactions.
Examples of countries that have introduced B2G mandatory e-invoicing are Sweden, Croatia, Estonia, Lithuania and Slovenia, and there is an upcoming mandate in Portugal that will come into force for all companies by January 2022. Finland is aiming for the same effect through a buyer-initiated mandate for the supplier to send e-invoices.
What is PEPPOL?
The PEPPOL project was initiated in 2008. One of its main objectives was standardisation of the public procurement process in European governments. PEPPOL is a set of artifacts and specifications created to enable cross-border e-procurement, supported by a multi-lateral agreement structure which is owned and maintained by the OpenPEPPOL association.
PEPPOL aims to remove complexity around interoperability, as all parties that use PEPPOL will adhere to the same regulations and technical standards to exchange e-documents. Through the PEPPOL network, companies can exchange electronic procurement documents including e-Orders, e-Advance Shipping Notes, e-Invoices and e-Catalogues via access points based on what is known as a four-corner model – meaning that suppliers and buyers are represented by service providers that process data on their behalf.
While PEPPOL is known to have its initial focus in Europe, it is expanding beyond the EU to Asia and recently has also received more attention in the Americas. Singapore was the first country in Asia and the first outside Europe to establish a PEPPOL Authority, facilitating the framework on a national level, but was soon followed by other countries.
Currently, there are OpenPeppol members in 31 countries. In addition to countries in Europe, these include Australia, Canada, China, Japan, Mexico, New Zealand, Singapore and USA, with Japan being the newest addition.
Recent developments in B2G e-invoicing
As explained above, several EU Member States took the opportunity when transposing the Directive 2014/55/EU to make B2G e-invoicing mandatory.
More countries are now following that path:
- Cyprus recently launched a Public Consultation on the bill which will make electronic invoicing mandatory for Public Procurement transactions as from 1 January 2022.
- Latvia has plans to make electronic invoicing mandatory for B2G transactions from 2025 in accordance with the PEPPOL framework.
- In Australia, all Commonwealth Government agencies are mandated to adopt e-invoicing by 1 July 2022 with the PEPPOL framework. The New South Wales government agencies are obliged to adopt e-invoicing for goods and services up to the value of AUD 1 million already from 1 January 2022, leading efforts to see e-invoicing adopted across Australia by making this change six months ahead of the mandate. There is no requirement in the pipeline to mandate businesses to send e-invoices to the government entities.
What is next?
Developments in B2G e-invoicing can no longer be considered separate from B2B e-invoicing. After all, many companies supply goods or services to public authorities, and investments in complying with government customer requirements under schemes like PEPPOL will drive the use of these same standards and rules in the business-to-business sector.
This also means that initiatives towards business-to-business electronic invoicing as a way for tax administrations to receive VAT-relevant data in real-time or near-real-time are increasingly influenced by concepts from the public procurement world.
This spillover goes well beyond conceptual inspiration. In Italy, for example, support for mandatory e-invoicing for VAT control purposes in 2019 was built on a massive data processing platform that was initially designed to facilitate public procurement. France and Poland are far down the path of similar architectures for their continuous transaction controls plans.
As PEPPOL becomes more popular as a standard to make country-specific public procurement methodologies more easily accessible for suppliers abroad, its concepts will increasingly penetrate the broader worlds of electronic invoicing, electronic trade and fiscal compliance.
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