A glimpse into the e-invoicing landscape in Asia Pacific
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 is new to the tax digitization journey (except for South Korea) 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 in their state budget plans to launch a pilot e-invoicing program in 2023, starting with selected taxpayers. The budget statement views e-invoices as the main strategy to improve the country’s tax revenue and digital services infrastructure.
The Malaysian Inland Revenue Board (HASIL) and the Malaysian Digital Economy Corporation (MDEC) recently shared details regarding the project in engagement sessions.
Malaysia appears to be following a CTC clearance model, 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 likely cover all domestic (B2G, B2B and B2C) and cross-border transactions.
Following the engagement sessions, HASIL published a press release on 22 May 2023 and announced the implementation timeline of the upcoming e-invoicing mandate. As per the announcement, the mandate will be rolled-out in a phased manner starting in June 2024 for selected taxpayers and ending in January 2027 for all businesses.
Although the authorities have announced the implementation timeline, no official information or documentation about the type of the e-invoicing model is available yet. The information presented at the conference is not binding and may be subject to change.
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.
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.
In March 2023, the pilot program of fully digitalized e-invoices was expanded to cover newly registered taxpayers in Inner Mongolia, selected taxpayers in Henan, Jilin, Fujian and Yunnan provinces and the cities of Shenzen and Ningbo. These taxpayerscan issue a fully digitized e-invoice through the electronic invoice service platform without using special tax control equipment following real name authentication checks.
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.
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.
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 that have adopted a CTC system. Businesses must prepare to adopt the new e-invoice compliance requirements trending around the world, and in particular, across Asia.
