Electronic invoicing in France

Electronic invoicing (also called e-invoicing or einvoicing) is a form of electronic billing. E-invoicing methods are used by trading partners, such as customers and their suppliers, to present and monitor transactional documents between one another and ensure the terms of their trading agreements are being met. These documents include invoices, purchase orders, debit notes, credit notes, payment terms, payment instructions and remittance slips.

The perception of the electronic invoicing is that it is simply the exchange of what used to be a paper invoice in some sort of electronic format. However, electronic invoicing in 2021 is far more than the simple digitalization of an invoice. It has to be apprehended in the context of an extended B2B process that includes multiple data entries, validation of delivery, invoicing per se, then long delays that can create a working capital crunch and a need for financing, and finally various tax payments, before a potential second, third iteration and more.

Introduction

As in its general use, the main purpose of electronic invoicing is to make Account Payable and Account Receivable processes more efficient. It is essentially a business-to-business process that is settled between companies. As such, various standards exist. At a global level, none of them prevail and most of them are not interoperable with one another:

• EDIFACT
• UBL (Universal Business Language)
• Finvoice (Finland)
• EHF (Elektronisk handelsformat) (Norway)
• E-Invoice (Estonia)
• FacturaE (Spain)
• FactureX (France)
• FatturaPA (Italy)
• CFDI (Mexico)
• ISDOC (Czech republic)
• E-faktura (Poland)
• OIOUBL (Denmark)
• PEPPOL BIS (various countries)
• Svefaktura (Sweden)
• UBL-OHNL (Netherlands)
• ZUGFeRD, XRechnung (Germany)
• Nota Fiscal Eletrônica (Brazil)
• Facturación Electrônica (Ecuador)
• DTE (Chile)

European directive

Origin of definitions. The original European definition of an eInvoice is that which is included in the VAT Directive 2006/112/EC as amended by Directive 2010/45/EU. The directives make it an invoice whatever document that:

• contains the information specified in the directive,
• has been issued and received in any electronic format. It can be a structured format capable of being machine readable and automatically processed, or a non-structured format represented by a humanly readable visual presentation of an eInvoice (such as a simple PDF) or a combination of a structured and non structured format, often referred to as a "hybrid" invoice.

Although the definition has been amended since then, these variations are discussed in further detail in the body of the paper.

Landmark decision. The landmark text mandating eInvoicing in Europe is the Directive 2014/55/EU on electronic invoicing in public procurement. In this directive, eInvoicing is defined specifically as an invoice that has been issued, transmitted and received in a structured electronic format which allows for its automatic and electronic processing and respects a specific format.

All European Union member countries must transpose their legislative frameworks to Directive 2014/55 /EU and subsequent rulings on eInvoicing in order to harmonize the procedures for issuance and control of this type of document within the EU. The common legal framework for member states highlights the need to guarantee the origin and authenticity of eInvoicing.

Many of the member states of the European Union have already implemented eInvoicing on a mandatory basis between the Public Sector and its suppliers with the aim of simplifying tax compliance and reducing economic costs. With the new European Union standard for eInvoicing, the EU wants to facilitate public procurement and electronic commerce at the cross-border level.

It is important to note that Directive 2014/55/UE is a standard that explicitly aims to facilitate cross-border commercial relations with the creation of a common standard that is interoperable. Other principles include the following.

Reach and automation. Economic operators should be able to reliably send, or make available, and receive eInvoicing and related documents to and from all types of trading partner, public or private, in Europe and elsewhere. Transmission should support the automation objectives of these economic operators, whilst also supporting the need to employ manual processes when necessary, for example in the event of discrepancies or when automatic matching and processing is not possible for a receiver owing to the relative immaturity of its information systems and procedures (especially relating to smaller organizations).

Choice and interoperability. All economic operators acting as suppliers should be able to choose the transmission tools, mechanisms, or service and solution providers that meet their requirements, provided that these are interoperable and compatible with the transmission mechanisms of buyers, whoever they may be. It is recognized that connections between highly heterogeneous economic operators need to made and sustained.

Solutions. The use of service and solution providers is strictly a matter for economic operators. Providers offering business, information technology and communication services are encouraged to develop and continuously evolve efficient and cost-effective (not exceeding the cost of paper invoicing) products and services, which support business and technical interoperability, and, wherever feasible, remove the need for human intervention. The latter is dependent on the preparedness of economic operators to adapt their processes and deploy the necessary skills. The market for services should be competitive, innovative and offer choice to users of all sizes.

Fiscal compliance. Transmission solutions should enable all economic operators to fully meet their obligations in respect of compliance with applicable fiscal rules, in particular VAT regulations, and requirements for authenticity, integrity and legibility relating to eInvoicing. This may increasingly require reporting and registration facilities to meet the requirements of tax authorities.

Standards. The environment should embrace standard definitions, open and non-proprietary technical standards and well-established business practices to support ease of implementation, continuing use and maintenance. It should support the common models and methods of eInvoicing and electronic data interchange, and include provision for confidentiality and non-repudiation, appropriate levels of security, timely receipt and response messages, and, as required, visualization in human-readable form.

Identification of parties. Addressing, routing and identification mechanisms should be progressively standardized by the industry and should be easily discoverable through a registry or directly in an eInvoicing solution.

Governance. Stakeholders need to take care to create and safeguard boundaries between the competitive space and the areas of cooperation appropriate to networked environments. Appropriate governance should be established for such cooperation models.

Pre-European directive French legal framework

General Tax Code

In France, tax laws are managed by the Direction Generale des Finances Publiques (DGFiP, by its French acronym)

French, tax laws already provided for two computerized data exchange formats (échange de données informatisé, or EDIs by the French acronym) to dematerialize an eInvoice prior to the 2014 European Union directive.

• On the one hand, Article 289 (b) of the General Tax Code allowed for a "classic" structured EDI. This format allows for automated processing based on a predefined data model. Article 289 (b) of the General Tax Code states that: "invoices sent electronically in the form of a message structured according to a standard agreed between the parties, allowing computer reading and which can be processed automatically and unequivocally, constitute documents in lieu of original paper invoices." 
• On the other hand, Article 289 (e) of the General Tax Code allowed invoices to be dematerialized in unstructured formats (such as Microsoft Word or pdf). Article 289 (e) of the General Tax Code: "Invoices may, subject to the acceptance of the recipient, be transmitted electronically as long as the authenticity of their origin and the integrity of their contents are guaranteed by some form of electronic signature. The invoices thus sent are considered the original invoice for the application of Article 286[4] and this article."

Adoption timeline prior to 2014

The adoption timeline was as follows:

• 1991: beginnings of dematerialization in France subject to approval by the Directorate General of Taxes: only structured eInvoice formats are produced
• 1998: Facilitation of implementation by the abolition of accreditation (Article 289bis); third parties appear in the process via web platforms
• 2001: European Directive 2001/115/EC harmonizing legal references; introduction of electronic signature and unstructured PDF format
• 2003: Article 242 of the General Tax Code
• 2012 From January 2012 on, all instances of the French government will have to be able to receive eInvoices in order to generalize the eInvoice. This is in line with the European projects already undertaken, and could represent billions of euros in savings. However, to be truly effective, the measure would have to extend to local authorities (which is not the case) which currently account for the largest share of bills.

Standardized data model prior to 2014

Prior to the EU directive, the following information was already mandatory to be included in any form of eInvoicing:

• the full name and address of the taxable person and his customer;
• the individual VAT identification number assigned to the taxable person and under which occurred the supply of goods or the provision of services;
• the VAT identification numbers of both the seller and the buyer;
• the service provider's VAT identification number as well as that provided by the recipient for the services;
• when the taxpayer is the tax representative of a person not established in the European Union, the individual identification number assigned to this tax representative, as well as his full name and address;
• the date of issuance;
• a unique number based on a chronological and continuous sequence;
• for each of the goods delivered or services provided, the quantity, the normalized name, the unit price excluding tax and the legally applicable VAT rate or, where applicable, the details of an exemption;
• any rebates, discounts acquired and quantifiable during the operation and directly linked to this operation;
• the date on which the delivery of goods or the provision of services is made, or completed, or the date on which a deposit is paid, insofar as such a date is determined and is different from the date of issue the invoice's;
• the amount of tax to be paid and, by tax rate, the total excluding tax and the corresponding corresponding tax separately;
• in the event of an exemption, the reference to the relevant provision of the General Tax Code or to the corresponding provision of Council Directive 2006/112 / EC of 28 November 2006 on the common system of value added tax or any other mention of obtaining an exemption measure;
• when the purchaser or recipient is liable for the tax, the words: “Reverse charge”;
• when the purchaser or recipient issues the invoice in the name and on behalf of the taxable person, the words: “Self-billing”;
• when the taxable person applies the special tax provision for travel agencies, the words "Special scheme - Travel agencies";
• in the event of application of the tax provision for the sale of second-hand goods, works of art, collectibles or antiques, the words "Special regime - Second-hand goods", "Special regime - Works of art ”or“ Special regime - Collectibles and antiques ”depending on the operation considered;
• transportation details, for the application of the VAT exemption which concerns intra-Community deliveries of a new means of transport;

Additions pursuant to the 2014 European directive

The European directive created an environment conducive to the deployment of new effective solutions.

Business to government

Mandatory use of the eInvoice while invoicing the French Public Administration was implemented in a phased manner from 2017 to 2020 based on the size of the company. As per the European directive, eInvoicing was only mandatory in relations to contracts whose buyers were a public entity or government.

• January 1, 2017 for large companies (more than 5,000 employees) and public entities
• January 1, 2018 for medium-sized companies (250 to 5,000 employees)
• January 1, 2019 for SMEs (from 10 to 250 employees)
• January 1, 2020 for micro-enterprises (less than 10 employees)

As of March 2021, 100 percent of the public administration’s suppliers are expected to issue their invoices in electronic format.

Landmark decision

In November 2020, the French Government issued changes to the eInvoicing laws. Those changes are contained in the Projet de Loi de Finances pour 2020, article 56:[8] invoices for transactions between persons subject to value added tax are issued in electronic form and the data contained therein are transmitted to the administration.

Said changes set the stage for the following to be made mandatory in the near future:

• eInvoicing for all B2B domestic transactions
• E-reporting on all transactions between domestic companies and individuals/foreign businesses

The deadline for compliance with these new requirements will again depend on company sizes. For large businesses, compliance shall be required from January 2023 on, for medium sized companies the deadline shall be end of 2024, whilst smaller companies shall have until 2025.

The law clearly demonstrates the government’s intention to make eInvoicing mandatory in the B2B sector with the aim of modernizing VAT collection and improve tax compliance. It also provides for a reporting framework that will be proposed to European parliament as a EU-wide standard.

The DGFiP, is responsible for coordinating the program. It was tasked to identify and assess the most suitable technical, legal and operational solutions, particularly for transmitting data to the tax authorities in accordance with the operational constraints of all parties involved. An independent consultant will be appointed to draft the plan, which will consider all parties involved, including businesses, accounting professionals, and governmental bodies. The French tax authority is also receiving support from international experts to identify stakeholders’ needs, constraints and expectations: "The Government shall provide to Parliament a report on the conditions of implementation, from January 1, 2023 and no later than January 1, 2025, of the eInvoicing obligation in business-to-business relations. This report identifies and assesses the most suitable technical, legal and operational solutions, in particular".

The report will also evaluate the possible improvement and expected benefits for VAT tax recovery, as VAT fraud costs top 160 billion Euros in 2020.

The 2020 preliminary law makes clear that no matter how large or small, all French businesses will be required to receive Invoices by 2023, regardless of whether they are also required to be able to issue them by this point. The new law therefore mandates the use of eInvoicing for all businesses with effectiveness spread between 2023 and 2025. Nevertheless, it leaves open for assessment how invoices will be submitted to the government, directly or via third parties.

Invoicing stamp and third parties

Today, eInvoices can be delivered to the government via Chorus Pro, a portal developed by the Agence Francaise pour l'Informatisation de l'Etat (AIFE). This portal already centralizes the processing of all eInvoices addressed to the French public sector. In the new model, taxpayers could be required to send invoices to their appointed e-invoice agent (Plateforme Privée Certifiée). Such platforms will then forward to the tax authorities authorities who will in turn issue to the customer.

The 2020 preliminary laws leaves open the two models:

• a centralized platform model that should ensure transmission to the customer (mandatory transit via the public platform, which would be the only authorized entity to emit the invoice to the customer, also known as the V-model or the Italian model.
• certain private platforms, certified as trusted third parties, would authorized to emit invoices to buyers without going through the public platform as part of a Y-model
• a combination of both, with information being sent to the government after the invoice is emitted, following the Mexican-model with government certified agents for submitting live invoices for digital signatures prior to issuing to customers.

Whatever the choice, already burgeoning inconsistencies will present challenges for businesses operating across Europe and needing to comply with several varying requirements. It also puts into question the aspirations of the European Commission for a harmonized system.

Format

Format. For invoices addressed to the public administration as of 2017, two types of XML file are permitted: INVOICE UBL V2 and UN/CEFACT CII (CCTS/NDR v3.0). Invoices may also be submitted in PDF format, signed through the Chorus Portal for small and micro businesses issuing fewer than 1000 invoices monthly.

Storage. Although the legal obligation stipulates preserving invoices for 6 years, it is common practice for issuer and recipient to keep the original documents for at least 10 years due to the different interpretations that may be drawn from the specifications set forth in the different French codes.

e-Signature. In France, the use of e-signature in invoices has traditionally been relegated to PDF formats, with structured formats, (EDIFACT, XML, X12, etc.) being subject to additional controls. Nevertheless, forecasts point to increasing use of electronic signature based on acknowledged certificates from a secure device

Chorus Pro

Chorus is the product of a government project launched by the French government in April 2007 with the aim to replace the ACCORD application for the management of all government expenditures and accounting. The Chorus application is shared by all entities related to the French government. All government programs and tenders have been managed in Chorus since the switch to Chorus took place on January 1, 2012.

Building on the success of the Chorus platform, the French government decided to launch Chorus Pro for all companies selling to the government or a government-related entity to invoice their buyer. Now, building on the successful implementation of eInvoicing with public administrations through the Chorus Pro platform, the French government is considering replicating the model and extending it to the private sector.

To do so, the Tax Authority and the French government are assessing the possibility of using Chorus Pro for the declaration of invoices between enterprises, making Chorus Pro the central point for B2B invoices. To analyze the feasibility of the system a pilot project has been underway with 50 companies since January 2021.  The project will analyze interactions between participants to identify constraints and propose improvements. The results of the pilot project will be used to draft the report submitted to the French parliament in September.

The Chorus Pro platform is available here.