France Takes First Steps Towards Mandatory B2B Electronic Invoicing

Back in June this year, many heads were turned when the French Minister of Public Accounts and Action, Gérald Darmanin, went on record stating that the French Government has the intention of making e-invoicing mandatory also for B2B transactions. Now it seems that the Government – spearheaded on this topic by Minister Darmanin as well as by the Minister of Finance Bruno Le Maire – has moved from word to action. The French Finance Bill for 2020, formally presented after the meeting of the Council of Ministers on 27 September, codifies the plan to extend the B2G e-invoicing obligation in force today to cover also B2B e-invoices.  

What’s new?

In just three short paragraphs, the draft finance law outlines the major principles for the budding reform. While much is left to be clarified by later decrees, art. 56 of the Finance Bill introduces the main rule that electronic form for invoices will be mandatory and that, as a result, paper invoices will no longer be permitted. It also introduces language that means that e-invoices most likely also will be cleared by the tax authority, or otherwise have the data transmitted to the tax authority to enable control of the VAT on the invoice. France will effectively, and not surprisingly, be joining the ranks of other countries such as Mexico, Turkey, Italy and Brazil, who have implemented measures to tackle its VAT gap through real-time VAT control mechanisms. 

The timeline of the roll-out of the mandate will, just like the roll-out of the B2G mandate currently in force, be scheduled in stages; gradually becoming applicable for companies depending on the size of the business. The first stage of the mandate will begin on 1 January 2023, and according to the bill the entire economy should be up-and-running under the new e-invoicing system no later than 1 January 2025.  

The Government also states that it, during the course of next year, will present a report to parliament, the Assemblée Nationale, presenting how the reform will be carried out as well as the underlying analysis of which method and what regulations constitute the most appropriate technical, legal and operational solution, particularly as regards the clearance/transmission of invoice data to the tax administration.

What’s next?

In addition to the analysis and drafting of both laws and reports that the Government announced, it’s also clear that one more critical element needs to be covered before the reform becomes a reality: Brussels.  

Ever since Italy went down this same path and became the first EU country to introduce mandatory clearance B2B e-invoicing, many parallels have been drawn between the two countries. They share a similar situation in terms of VAT gap and IT infrastructures, which have made many experts (rightly) assume that France would follow down the path Italy set out. However, in order to lawfully do so, Italy had to seek and obtain permission from the EU Council to deviate from the provisions of the EU VAT Directive (2006/112/EC). The French Government has acknowledged that it will need to do the same.