According to the latest global market report, Billentis, the Asia Pacific region is expected to achieve the highest annual e-invoice volume growth rates compared to Latin America and Europe until 2025.
This is mainly because the Asian market, outside of South Korea, is new to the tax digitization journey and is accelerating the adoption of e-invoicing as an effective measure for VAT control.
Though the types of e-invoicing strategies implemented in the APAC region vary greatly, we can also identify some common characteristics.
There are jurisdictions with a strong common law legacy, such as Singapore and Japan, which typically focus regulatory measures on record retention. In recent years, many of these countries have started gearing up toward regulating e-invoicing issuance (notably by adhesion to the PEPPOL system), e.g., Singapore. Associated national standards have been adopted for a wide range of e-invoicing flows for B2B and B2G scenarios.
Conversely, Latin American clearance models and continuous transaction controls (CTCs) influence some countries. Examples of jurisdictions with CTCs are China and Taiwan.
More countries aim to introduce a staged approach to mandatory e-invoicing or CTCs in the coming years. Notable examples are Saudi Arabia, which in January 2023 introduced a clearance regime in multiple phases for different taxpayer groups, and Vietnam, which will be doing the same in the coming years.
Here’s a highlight of the recent e-invoicing developments in Asia Pacific.
E-Invoicing in Malaysia:
In October 2022, the Malaysian Ministry of Finance announced their plans to implement a CTC model.
Malaysia appears to be following a CTC clearance model for certain transactions, such as the one implemented in Italy, where e-invoices must be sent to the tax authority in real-time to obtain validation before being delivered to buyers. The scope of the system will cover all domestic (B2G, B2B and B2C) and cross-border transactions.
The scope of transactions that are subject, per default, to mandatory e-invoicing are B2B and B2G in the following sectors: automotive, aviation, luxury goods and jewellery, construction, licensed betting and gaming, and payments to agents, dealers and distributors.
Malaysia will also follow a CTC reporting model for all other transactions where e-invoicing is not mandatory and not requested by the buyer. In these cases, taxpayers will be allowed to issue invoices and receipts as per the current practices and then report them monthly through the issuance of a consolidated e-invoice.
The mandate will be rolled out in a phased manner starting in August 2024 for taxpayers with an annual turnover or revenue of more than MR100 million, and it will apply to all businesses from July 2025.
Read more about e-invoicing in Malaysia here.
E-Invoicing in Thailand
In Thailand, the government has been working to develop a robust e-invoicing system with a framework that boosts e-invoicing using certified third-party service providers for e-tax issuance.
Using service providers is a viable alternative for businesses as some don’t want to invest or develop their own e-tax systems, whilst others cannot afford to create a compliant invoicing system. This is due to the complex technical and legal steps to maintain their own compliant system. The Electronic Transactions Development Agency (ETDA) started a certification process for electronic service providers to assess whether the applicant’s solution is secure and compliant.
More recently, the Thai Revenue Department (TRD) and the Electronic Transactions Development Agency (ETDA) published new regulations to improve the e-tax invoicing system. The regulations include aspects like the e-tax invoice content and standards for forms, delivery methods, storage and information security for operations relating to electronic invoicing.
Thailand has also recently announced an extension of tax incentives for taxpayers using the current e-tax invoicing system to promote e-invoices in the country. These measures could also signal a future mandatory e-invoicing mandate; however, there is no mandate or defined timeline yet.
Read more about e-invoicing in Thailand here.
E-Invoicing in South Korea:
E-invoicing has been mandatory in South Korea since 2011 with the implementation of their Electronic Tax Invoice System.
The scope of the e-invoicing obligation covers all corporations as well as individual taxable persons that exceed a certain turnover threshold. Since entering into effect in January 2012, the scope for sole proprietors has been reduced from 1 billion KRW to 0.1 billion KRW in July 2023.
South Korea´s Electronic Tax Invoice System is considered to be a CTC (Continuous Transaction Control) model – not due to the e-invoicing requirements, since the Tax Authority does not interfere in the process of their issuance, as opposed to CTC clearance models. Instead, it has a CTC reporting model in place as all e-tax invoices must be reported to National Tax Service (NTS) within one day of issuance.
The scope of the mandate in the country covers only domestic transactions (B2G, B2B and B2C). Cross-border transactions are out of scope.
Read more about e-invoicing in South Korea here.
E-Invoicing in China:
E-invoicing has been gradually introduced in China, starting with B2C. In September 2020, the State Taxation Administration (STA) announced a pilot program enabling selected taxpayers operating in China to issue VAT special electronic invoices on a voluntary basis, which are generally used in B2B transactions.
In 2021, the Tax Bureaus of Shanghai, Guangdong Province and Inner Mongolia Autonomous Region announced a new pilot program covering selected taxpayers, introducing a new fully digitized e-invoice.
Following the recent developments in China regarding the Pilot Program for e-Invoicing, which was expanded to new provinces and cities in November 2023, the last province of Tibet has now implemented issuing fully digitalized electronic invoices (e-fapiao) for selected taxpayers.
Therefore, from 1 December 2023, the Pilot Program has expanded nationwide and all regions in China allow pilot taxpayers to issue fully digitalized invoices. This means that the selected taxpayers – or, depending on the province, newly registered ones – will be obliged to issue e-invoices (e-fapiao) after receiving notification from the tax authorities.
Read more about e-invoicing in China here.
E-Invoicing in Singapore
In 2018, the Singapore Government Agency, Infocomm Media Development Authority (IMDA), joined the non-profit international association OpenPEPPOL, responsible for the development and maintenance of the PEPPOL specifications. Singapore became the first National Authority outside Europe to join as a PEPPOL Authority, .
In 2019, the IMDA officially launched nationwide e-invoicing network (InvoiceNow) with intentions to extend the International Peppol E-Delivery Network by allowing businesses to transact internationally with other companies through this network. The IMDA has been encouraging businesses to use InvoiceNow in B2B and B2G transactions as an efficient, modern solution for invoicing and document delivery.
Additionally, it was recently announced by the Senior Minister of State that ‘InvoiceNow’ will become the default e-invoice submission channel for all government vendors within a few years. Although issuing electronic invoices is not mandatory for B2B or B2G transactions, it appears the InvoiceNow program and PEPPOL will be utilised for a B2G e-invoicing mandate in the near future.
E-Invoicing in Japan
Japan has adopted a voluntary e-invoicing system. The Standard Specification for Digital Invoices (JP PINT) based on the global standard PEPPOL specification is published for Japanese taxpayers wishing to issue and exchange electronic invoices over the PEPPOL network. The E-Invoice Promotion Association (EIPA) is encouraging taxpayers to use the PEPPOL standard.
In line with the country’s efforts to improve tax controls, Japan is introducing the so-called Qualified Invoice System (QIS), taking effect on October 2023. In this system, the total amount of the consumption tax corresponding to each rate must be included in the invoice along with the registration number of the qualified issuer. Taxpayers must register to issue qualified invoices. The QIS does not mandate taxpayers to issue invoices electronically.
Read more about e-invoicing in Japan here.
E-Invoicing in the Philippines
In 2019, the Philippines introduced the Innovation Act as a part of its Digital Transformation Strategy (PDTS). In line with this strategy and the provisions of the Tax Reform for Acceleration and Inclusion (TRAIN) Act, the Electronic Invoicing/Receipting System (EIS) was launched on 1 July 2022 for 100 pilot taxpayers.
The TRAIN Act established 1 January 2023 as the target date when all taxpayers under scope would become obliged to comply with the Philippines e-invoicing and CTC e-reporting obligation. However, the authorities have not yet published an official calendar for expansion of the system. Currently, the 100 pilot and other large taxpayers individually notified by the BIR are the only ones obliged to comply, while the expansion calendar is still awaited.
Read more about e-invoicing in the Philippines here.
E-Invoicing in India:
India’s Goods and Services Tax (GST) framework introduced an e-invoicing system which falls under the Continuous Transaction Controls (CTCs) category, to improve tax compliance and reduce evasion.
This system mandates the reporting of invoice data to an Invoice Registration Portal (IRP) for clearance before the exchange with the trading party. For an invoice to be legally valid, it must include an Invoice Registration Number (IRN) obtained from an IRP. This requirement applies to B2B, B2G, and export transactions. Invoice data must be submitted in JSON format to IRPs, although invoices can be exchanged in JSON, PDF, or paper form, with a mandatory archiving period of eight years.
The e-invoicing rollout began voluntarily in January 2020 for businesses with turnovers exceeding Rs. 500 Crore, gradually extending to smaller businesses. By August 2023, the mandate applies to taxpayers with annual turnovers of Rs. 5 Crore or more. Non-compliance, such as failing to register an invoice on the IRP, incurs penalties of at least Rs. 10,000 per instance, along with additional GST penalties and interest.
Read more about e-invoicing in India here.
E-Invoicing in Indonesia:
Indonesia has embraced digital transformation in its tax system by introducing the e-Faktur system in 2014, becoming effective in 2016. This move towards electronic invoicing is a strategic effort to combat tax evasion and narrow the tax gap through continuous transaction controls (CTCs).
Mandatory for all corporate VAT taxpayers since July 2016, e-Faktur requires invoices to be generated through approved systems and validated by the Directorate General of Taxes (DGT) before being issued. Invoices must include tax invoice series number (“NSFP”) allocated by the DGT, and a QR Code. This CTC system enforces the use of electronic signatures and mandates processing through the eFaktur platform.
Read more about e-invoicing in Indonesia here.
E-Invoicing in Vietnam:
Vietnam advanced its tax compliance efforts by implementing a nationwide e-invoicing mandate from 1 July 2022, aimed at combating VAT fraud and reducing the VAT gap. Initially planned for July 2020 but delayed, the new timeline was established in October 2020 with Decree 123. The rollout begun in March 2022 in select provinces and cities, moving to a full national implementation by July. The initial implementation phase involved technical solutions in six local tax administrations, and expanded to all provinces by April 2022, setting a comprehensive framework for e-invoicing compliance across Vietnam.
This mandate requires all businesses, including enterprises, organizations, business households, and individuals, to register for and issue e-invoices in XML format for transactions.
Vietnam’s e-invoicing system distinguishes between authenticated e-invoices, which require a tax authority code before being sent to the buyer, and unauthenticated e-invoices, which do not require said unique code. Most taxpayers in Vietnam must issue authenticated e-invoices to comply with this mandate. E-invoices must be digitally signed by the supplier and archived electronically with secure and reliable methods to ensure integrity and authenticity.
Read more about e-invoicing in Vietnam here.
What to expect in the region
The winds of change in the region are blowing strongly in favour of digitizing invoicing systems. We see influences from different parts of the world, from Latin America with its decentralised clearance models to Europe with the Italian-style centralised clearance system, as well as with PEPPOL-inspired e-invoicing frameworks.
These are only a few examples of countries in the region adopting a CTC system. Businesses must prepare to adopt the new e-invoice compliance requirements trending around the world, and in particular, across Asia.
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