In the age of digital philosophy, when the electronic management of documents become more and more prominent in both private and public sectors, digitalization of invoices is rather a logical development than an innovative approach in the functioning of the supply chain. Harmonization of e-invoicing regulation in B2G sector has been in effect for seven years in the EU, while Serbia established an e-invoice system in 2019, prescribing mandatory registration of invoices issued in commercial transactions with the public sector on the central registry of invoices (CRF). The most recent novelty in the field happened with adopting the Electronic Invoicing Act and its by-laws when a comprehensive set of rules regulating e-invoicing came into effect.
However, the capability of the private sector to transfer to e-invoicing in B2B transactions remains the main challenge for Serbian legislators as well as their European counterparts. On the one hand, e-invoicing is not related solely to the modernisation of the supply chain but also to providing the tax authorities worldwide with a tool for combating tax evasion. On the other hand, it requires significant adaptation by private businesses.
Centralized system for e-invoicing
E-invoicing is based on the central invoice exchange system, an information system that provides validation and transmitting of invoices. This method of delivering the invoices has already been put to the test in Italy, one of the first countries that introduced mandatory e-invoicing for both B2B and B2G transactions, the so-called Sistema di Intescambio (SdI). The system functions in the following way: once the supplier sends the invoice and the validity of the document has been confirmed, the system delivers the invoice to the certified e-mail or the electronic channel the customer has communicated to its supplier.
Apart from the supplier and the customer, this centralized system may involve intermediaries, i.e., providers of services related to receiving and sending invoices. In Croatia, where the transmitting of the e-invoices is performed by Finansijska agencija (FINA), intermediaries can be registered as providers of the service of receiving an e-invoice, sending an e-invoice or both options. Currently, four providers of the aforementioned services operate in Croatia, two providing the service of receiving e-invoices and two providing the services of sending e-invoices.
In newly adopted Serbian regulation, intermediaries constitute private sector entities performing the activities related to the issuance, sending, receiving and storage of electronic invoices based on the prior approval by the Ministry of Finance. Irrespective of engaging intermediary, supplier/the issuer of e-invoice remains liable for providing the compliance of the invoice with the existing standards.
The importance of digitizing the invoicing for establishing e-VAT reporting system
In France, mandatory e-invoicing was introduced as part of the new tax system introduced by Direction Générale des Finances Publiques (DGFiP). The new system should serve multiple goals – prevention of tax evasion, provision of new economic tool for performing control over taxpayers and real-time data on the economic activity between the private sector. These goals could be achieved due to the comprehensiveness of data in e-invoices, as well as the authenticity of their content, guaranteed by the electronic signature of the issuer. As a result, e-invoices has the potential to become the alternative to bank records as evidence of commercial transactions.
Prior to becoming mandatory in B2B transactions, Italian authorities offered two alternatives to VAT taxpayers – either to send invoice data to Tax Authority quarterly or to start issuing e-invoices in transactions with the private sector. The importance of e-invoicing for Tax Authorities in some countries could be seen through the imposition of an obligation of VAT-registered entities to report all invoices to the Tax Authority even before imposing mandatory e-invoicing in a B2B transaction. VAT registered enterprises are the main private entities subject to mandatory compliance with new Serbian law. Compliance of other categories of taxpayers (income from self-employment and corporate income tax) with the Electronic Invoicing Act is voluntary.
Challenges and opportunities
The recently adopted Electronic Invoicing Act has set the following time-frame for complete implementation of e-invoicing:
- mandatory e-invoicing in B2G and G2G transactions from 1.1.2022;
- mandatory e-invoicing in G2B transactions from 1.7.2022;
- mandatory e-invoicing in B2B transactions from 1.1.2023.
Unlike the French approach which included simulation of ChorusPro e-invoicing system for private businesses, there was no pilot test for assessing the preparedness of the Serbian private sector to comply with the new regulation. French pilot project tested the functioning of the centralized e-invoicing platform, as well as adaptability of key players, i.e., the representatives of all industries and categories of enterprises to the system.
Although the mandatory e-invoicing in France was scheduled for a period from 1.1. 2023 to 1.1.2025, a significant percentage of enterprises expressed doubts regarding their readiness to adapt to the new obligation of e-invoicing. According to the data presented by the company Opinion Way, for 4 out of 10 French enterprises there is uncertainty regarding the compliance with the new regulation until the prescribed deadline. In numbers, that amounts to one million enterprises. Could we expect that the Serbian enterprises will show more capacity in digitalization of their supply chains?
According to some estimations, in the EU there are currently over 5 million companies that issue e-invoices in B2G transactions. Mandatory e-invoicing for public authorities involved in commercial transactions was introduced by Directive 2014/55 aimed at establishing receiving and processing e-invoices according to the European standard. Up to this point, Italy is the only EU member that has completed the transition to e-invoicing in B2B transactions and plans to widen the obligation of e-invoice issuance even to cross-border transactions.
A study of the Digital B2B Observatory of the Politecnico di Milano showed interesting data regarding the business orientation of Italian enterprises. Namely, investing in digitalization is not restricted to those companies operating in R&D sector. Rather, the level of investing in supply chain monitoring tools are only 0,7% lower than investing in blockchain and AI. In this way, the capacity of an enterprise to respond to the challenges of digitalisation becomes the indicator of its competitiveness.
This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.
By Milos Velimirovic, Partner, and Aleksandra Cvorovic, Trainee, Samardzic, Oreski & Grbovic