It’s very possible that US companies are breaking laws governing storage of electronic invoices in the EU without realizing they’re putting themselves at risk for financial penalties.
The EU is an entity that, as the Brexit debate has shown, can frustrate and baffle its own citizens. In the US, the EU is frequently misunderstood. The assumption that there is an EU law governing all member nations on a given issue is often incorrect, which can lead to breaches of individual countries’ regulations.
Electronic invoicing in the EU gets confusing
Archiving of e-invoices is a prime example. Most individual EU countries have laws that require local invoice storage. EU law states that a company can move its invoice archives to any other country as long as that country is part of the EU. In other words, a company storing invoices in Italy can move an archive to Spain without breaking Italian or EU law.
But moving archives outside the EU? That’s a different issue altogether, and it gets complex quickly. US companies cannot, by law in most EU countries, simply uproot their e-invoice archives and move them out of the EU. If they do so without following legal protocol, they open their operations up to audits and penalties in individual countries. For instance, France could fine a company for moving its archive out of the EU, but the EU itself would not.
EU tax administrations don’t have uniform e-archiving rules
It’s not impossible to move archives outside the EU, but it’s difficult, and the process for legally displacing invoice storage varies country-by-country. In Poland and Spain, for example, it’s sufficient simply to notify the tax administration of a move, albeit with a letter that follows an official format.
However, in Germany and Portugal, the tax administration must approve the move before it can happen legally. Incidentally, that’s also the case for some countries outside Europe, including Australia, Canada, Malaysia, New Zealand and South Africa.
In other EU countries, a US-based company must verify the existence of a mutual tax assistance treaty between the company in question and the US if the company wants to move invoices from a subsidiary location to the US. That’s the case in Hungary, Italy, Luxembourg, Romania, the Netherlands and France. Then there is Norway, not part of the EU, which requires storage in a Nordic country.
Companies need to partner for EU e-archiving
The complexity of electronic invoices archiving regulations in Europe is enough to drive companies to simply store invoices inside the EU. But that’s easier said than done for many companies with complex archiving systems or limited storage capacity. Plus, with so many different laws governing archiving across Europe and the world, the risk of breaching requirements and facing financial consequences is very real.
The wisest decision US companies can make, then, is to outsource archiving to a third party that will keep them in line with regulations in Europe and beyond, as well as taking care of the maintenance and structure of the archive to ensure that it is ready for an audit at any time. Audits can prove to be expensive and sap key resources, so staying audit-proof should be a priority all over the world for US companies.
The Byzantine web of the EU and European laws is fully on display with regard to archiving e-invoices. Rather than submit to confusion and expose themselves to risk, US companies need to partner to ensure compliance.
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