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The Power of Tax

Making Sure That Tax Law in Europe Doesn’t Red Light Your E-Invoicing Plans

By Susie West

If every supplier on your database said Yes to your request that they invoice you electronically, wouldn’t life be easy? Getting suppliers to move away from paper can be tricky enough on its own. The reasons compelling suppliers to move from paper to electronic are hardly enticing. There are rarely signs of no-brainer business case for a supplier to stop printing and posting, and asking IT to set up a connection to your accounts system instead. High volume Suppliers might be able to justify it, but you start working your way down to the Suppliers that send 200 or 100 invoices a year, and real resistance starts appearing.

But is this just a European problem? I was talking to a Fortune 100 company this week. They have a global P2P organisation with one shared services centre in India, a single system, and standard processes. Their ‘Zero Tolerance’ to no PO invoices in the US has worked well, and electronic invoices are standard. “But” said the senior director of P2P “Europe is a whole different game”.

This isn’t necessarily new, but US companies who reach internationally and who have finally nailed e-invoicing on their own turf, are bringing their best practice approach over to Europe where it’s looking a little overwhelmed.

Let’s face it, the only people who truly know about European tax and its implications are tax advisors who operate across Europe and some electronic invoicing networks. Even lawyers who draft up legislation for European Law may know their clauses word for word, but knowing how Germany, Spain and Greece will interpret, and respond to this law is a totally different ball game.

So you ask yourself, how feasible is it for a US e-invoicing project team to familiarise themselves with the intricacies of European Tax Law and each country’s interpretation of it, quickly and cheaply?

The truth is that e-invoicing in North America has generally worked because:

1. The mood there is more compliant – suppliers are typically open to doing what a customer asks, even if it involves effort. Suppliers are more keen to keep the customer happy and keep the business to avoid companies in a very competitive market getting a slice of the action.
2. There are fewer electronic file format types - so there is more of a chance that when your customer asks you to send electronic data, it's in a format you are at least familiar with, if not already using.
3. If an organisation in the US decides to roll out e-invoicing itself, or via a third party, the issues of language, and cultural references are non-existent, which makes the project move faster and the return realise sooner.
4. Finally there is one tax law in the US which you need to consider with electronic invoicing. In Europe there is a European Directive spelling out the do’s and don’t’s around electronic invoicing, but what is sometimes overlooked is that each country has its own interpretation of this Directive which requires understanding. Following the European Directive on its own, is meaningless.

Over coming these hurdles which companies, who have mastered e-invoicing in the US, see popping up as they cross the pond, can be done without starting from scratch. If you are determined to try electronic invoicing yourself and going for the home grown option, then working with a Tax advisor is essential. You may find that EDI for example, is not legal in many countries, and it’s worth knowing this before your investment is made. Third party providers are taking off in Europe and ‘Networks’ are now no longer food for the trailblazers alone. They are becoming pretty common-place, but knowing that they are legal in the countries you want in scope is a must.

There is sense in trusting other organisations too. Networks are now finding themselves with users numbered in the tens of thousands. Having frank reference calls with Buyers who have been plugged into these networks for years, and asking them about their live volumes in given countries can sometimes be enough for your Tax team to give you the green light to proceed. After all, if HP or Bristol Myers Squibb have made the leap with certain networks, then there is sense in piggy backing on their assessment effort without re-inventing the wheel and spending tens of thousands on a third party tax advisor yourself.

So coming back to the call with the Senior Director of P2P, we closed with the understanding that, even if, as a US company with international reach, you partner with a third party provider who can support all the languages of the countries you have in scope, and is legal (and transacting!) where you want them to be, your e-invoicing project can still flounder. Success is sweet, but there are some factors, on top of tax and language capabilities, which are essential if success is a given.

For more information on how to make e-invoicing work, please call Susie West on +44 207 359 5355 for more information.

 

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