Indirect Tax Apero

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Indirect Tax Apero Electronic invoicing and

archiving March 2012

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Contents

Introduction

► Background

► International e-invoicing market 2011

► Legal framework

► Evolution towards 2013

Practical questions and sharing of experience

► General questions

► Accounts Payable

► Accounts Receivable

► Intercompany

Closing remarks

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Section A

Introduction

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Background

► EU Member States ► Invoicing Directive (2001/115/EC)

► Council Directive (2006/112/EC)

► Council Directive 2010/45/EU of 13 July 2010

► Implementation due by 1 January 2013 throughout the EU

► Explanatory Note – November 2011

► Non-EU countries ► Local rules remain in place

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International e-invoicing market 2011

Source: Billentis

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Belgian legal framework E-invoicing & e-archiving

E-Invoicing Article 53octies of the Belgian VAT code

► Authenticity

► Integrity Royal Decree no.1 29 December 1992 article 1, §2 … (acceptance by the customer) §3 … (cancelled as of 1 January 2010) §4 … (cancelled as of 1 January 2010)

E-Archiving

Article 60, §3 of the Belgian VAT code

► Authenticity, integrity & readability

► Location

► Format (circular letter 2008/16)

► Period

Current DRAFT 2013

E-Invoicing Belgian VAT Code

► Definition electronic invoice

► Acceptance by the customer

► Authenticity, integrity & readability as of issuance until end of storage period

► Taxable person determines how (!)

► Definition authenticity

► Definition integrity Royal Decree

► Electronic invoicing provisions abolished

E-Archiving

► Location

► Format (tolerance)

► Period

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EU legal framework Electronic invoicing (replacement art. 232)

Invoices issued pursuant to Section 2 may be sent on paper or, subject to acceptance by the recipient, they may be sent or made available by electronic means

The use of an electronic invoice shall be subject to acceptance by the recipient

Current Directive 2010/45/EU

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EU legal framework Electronic invoicing (replacement art. 233)

Invoices sent or made available by electronic means shall be accepted by Member States provided that the authenticity of the origin and the integrity of their content are guaranteed by means of:

► Advanced electronic signature …

► Electronic data interchange (EDI) …

► [If accepted by member state] other electronic means

The authenticity of the origin, the integrity of the content and the legibility of an invoice, whether on paper or in electronic form, shall be ensured from the point in time of issue until the end of the period for storage of the invoice Each taxable person shall determine the way to ensure the authenticity of the origin, the integrity of the content and the legibility of the invoice. This may be achieved by any business controls which create a reliable audit trail between an invoice and a supply of goods or services


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EU legal framework Electronic invoicing (replacement art. 233) [CONT’D]

“Authenticity of the origin” means the assurance of the identity of the supplier or the issuer of the invoice “Integrity of the content” means that the content required according to this Directive has not been altered

Other than by way of the type of business controls …, the following are examples of technologies …:

► An advanced electronic signature …

► Electronic Data Interchange (EDI) …

Directive 2010/45/EU

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EU legal framework Electronic archiving (replacement art. 247)

[Optional, TBD by Member State]

1. Limitations as to the place of storage

2. Limitations as to the original format

3. Storage: non- harmonized period

1. Each Member State shall determine the period throughout which taxable persons must ensure the storage of invoices …

2. Member State may require that invoices be stored in the original form in which they were sent or made available, whether paper or electronic …

3. The Member State may lay down specific conditions prohibiting or restricting the storage of invoices in a country with which no legal instrument exists relating to mutual assistance …


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Bu

ye

r S

elle

r

Order

Delivery Prepare invoice

Create invoice

Send invoice

Receive invoice

Prepare for

processing

Validation and

processing

Archive invoice

Archive invoice

Technical validation

ES

P (

op

tio

na

l)

Evolution towards 2013? How to audit authenticity and integrity?

Scope current legislation

Scope new legislation

Reception

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Section B

Practical questions and sharing of experience

General questions

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When invoicing cross-border, in which Member States do the e-invoicing rules apply?

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Which formats can be considered as VAT

compliant electronic invoices?

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<cac:PaymentMeans>

<cbc:PaymentMeansCode>46</cbc:PaymentMeansCode>

</cac:PaymentMeans>

<cac:TaxTotal>

<cbc:TaxAmount currencyID="AUD">1.68</cbc:TaxAmount>

</cac:TaxTotal>

<cac:LegalMonetaryTotal>

<cbc:LineExtensionAmount currencyID="AUD">18.61</cbc:LineExtensionAmount>

<cbc:TaxInclusiveAmount currencyID="AUD">18.61</cbc:TaxInclusiveAmount>

<cbc:PayableAmount currencyID="AUD">18.61</cbc:PayableAmount>

</cac:LegalMonetaryTotal>

<cac:InvoiceLine>

<cbc:ID>1</cbc:ID>

<cbc:InvoicedQuantity>1</cbc:InvoicedQuantity>


<cac:Item>

<cbc:Description>Mouse Trap</cbc:Description>

</cac:Item>

<cac:Price>

<cbc:PriceAmount currencyID="AUD">3.61</cbc:PriceAmount>

<cbc:BaseQuantity>1</cbc:BaseQuantity>

</cac:Price>

</cac:InvoiceLine>

<cac:InvoiceLine>

<cbc:ID>2</cbc:ID>



<cac:Item>

<cbc:Description>Light globe</cbc:Description>

</cac:Item>

<cac:Price>



</cac:Price>

</cac:InvoiceLine>

<cac:InvoiceLine>

<cbc:ID>3</cbc:ID>



<cac:Item>

<cbc:Description>Light globe</cbc:Description>

</cac:Item>

<cac:Price>



</cac:Price>

</cac:InvoiceLine>

</Invoice> <cac:Contact>

<cac:OtherCommunication>

<cbc:Channel>UBL.XML.org</cbc:Channel>

<cbc:Value>http://ubl.xml.org/users/jazza</cbc:Value>

</cac:OtherCommunication>

</cac:Contact>

</cac:Party>

XML

Pdf

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If an e-invoicing service provider shows me a VAT compliance report from a

third party, I can be confident that the solution

will be VAT compliant?

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Accounts payable

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Example

HQ

Data capturing

via templates

(background)

RS Interprete Ebydos

cockpit

Outlook

1

2

3

7

Verification + post invoice 6

Online

SAP

core

Start workflow

SAP Content

Server

Outlook

SAP Archive

Link

Workflow in

outlook with

hyperlinks to

SAP

8

5 Invoice

Image storage

RS transfer +

connector plug-In

4

Online

S A

P

sFTP

Outlook Collector

On site

Online

Scanners

Pdf

XML

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Can I accept a PDF invoice attached to an e-mail from

my supplier?

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If we receive a PDF invoice attached to an e-mail, can

we print the attachment and delete the original e-mail?

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If we receive a PDF invoice, can we export the data to another format (e.g. XML) for automatic processing?

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If the electronic invoices have been signed with an

electronic signature, I can accept them because it is a

commonly accepted method?

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Is it allowed to scan paper purchase invoices and to destroy the original paper

invoices afterwards?

Accounts receivable

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Example

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Do we need the upfront written agreement of the

customer?

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Can I issue a PDF invoice attached to an e-mail to my

customer?

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Can I post the data of the invoice on a web portal?

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Can I accept electronic self-bills issued by my

customer?

Intercompany

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Example

Customer

Sales

Company Order

confirm.

Vendor

Invoice

Opco

IC

invoice

P.O.

Procurement

Company

Order

confirm.

P.O.

Invoice

Invoice

Production

Company 5

Order

1

2

3

4

6

Cross company sales process Third party order process

5 1

2

3

4

Electronic invoices

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Can we consider the files exchanged by our ERP

(e.g. iDoc in SAP)

as VAT compliant e-invoices?

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Section C

Closing remarks

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No or little specific rules and guidelines on auditability. Therefore, business is responsible for being in control.

You should:

► Document ► Identify ► Validate & Test ► (Obtain Ruling)

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How can you show you’re in control

AP Accountant HC Accounting FPS Cash

and Bank

Purchase

order creator

Invoice approver

A/P Receive

invoice

A/P

Invoice

fulf ills

legal

requirements?

A/P Send invoice

back to vendor

A/P

Invoice

to be

scanned?

No

Yes

A/P

Hydrocarbons

invoice?

No

A/P

Does

invoice

mention

a PO?

A/P Execptions

(manual postings &

approval)

NoYes

A/P MM Queue

A/P FI Queue &

ERS advise

Yes

No

A/P Scan, Interpret

and Verify

A/P Scan, Interpret

and Verify

A/P Price

and

quantity

ok?

A/P Payment

A/P Payment

A/P Blocked

posting in SAP &

start w orkflow to

PO creator

No

A/P Price

and/or

quantity

delta

approved?

Yes

A/P

Wrong

posting

by

accounting?

No

A/P Correction

Yes

A/P Payment

A/P Contact

supplier for new

invoice or credit

note

No

A/P Park document

in SAP & start

w orkflow

A/P ERS

advise?

A/P Link image to

ERS invoice

A/P Payment

Yes

A/P

Does PO

number

exist?

A/P Enter PO

number

Yes

A/P

Price/quantity

ok?

Accounting

alloc.

correct?

No

A/P Final posting in

SAP

A/P Payment

Yes

A/P

Wrong

accounting

allocation?

No

A/P Contact

supplier for credit

note/new invoice

No

A/P Change

accounting

allocation


SAP

Yes

A/P Payment


SAP

Yes

A/P

Does

vendor

exist?

Yes

A/P Create vendor

No

A/P HC

Invoice

identif ied

A/P Order of

goods/services

(receipt in

SAP)

No

Yes

A/P

Receive

invoice

▶Document your process

(people, process, technology)

▶Use of flowcharts to improve

understanding

▶Documentation provides a

basis for communicating a

process (under control) to

those responsible for

monitoring (e.g. VAT admin.)

▶Clearly document the risks

and the controls within the

process

▶What could go wrong

questions may help

▶Do not forget the IT General

Controls (in particular access

management)

▶Audit your documentation and

process (or have it audited)

▶The more independent the

testing, the more credibility it

will have towards VAT

administration

Document

your process

Identify the

risks & controls Validate & Test

your controls

Is your process is (partly) outsourced?

Obtain an ISAE 3402 (former SAS 70) or similar with the right scope from your supplier

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How can I convince the various stakeholders that

my solution is VAT compliant?

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Approach Phase 1 – Drafting of the solution description

Deliverable

► Following our review, we will provide you with a complete and clear solution description which will be used as the basis for our VAT compliance assessment.

Objective

► Validation whether the design of your electronic invoicing and archiving solution would lead to VAT compliant electronic invoicing and archiving.

Approach

► Following the receipt of a solution description of the in-house e-invoicing and archiving solution of your company with regard to its electronic invoices, EYwill validate the completeness of the solution description.

You provide EY with a

solution description

(based on EY template

with example

description)

Ernst & Young reviews

initial description and

identifies areas that

require additional input

You provide

comments and Ernst &

Young provides final

solution description

A B

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Approach Phase 2 – VAT review of the solution description

Deliverable

► Following our validation, we will provide you with a VAT compliance report on the solution. This VAT compliance report will contain the solution description provided by you, the country’s VAT requirements and our validation/comments.

Objective

► On the basis of the final solution description, perform a validation of the electronic invoicing and archiving solution and confirm whether it is compliant with the VAT legislation.

Approach

► You send us a request to perform a validation for one or more countries.

► If it would appear that the solution description is in line with the country’s VAT legislation, Ernst & Young will draft a confirmation letter.

► However, if it would appear that the solution description is not in line with the country’s VAT legislation, we will draft a VAT compliance report and list the shortcomings, as well as recommendations.

C D E

Ernst & Young

validates the solution

description against

the VAT legislation

Ernst & Young

inventarises the

VAT legislation

Ernst & Young

provides a

confirmation letter or

draft VAT compliance

report

You decide to

proceed in

making the

solution VAT

compliant

Ernst & Young

provides you with an

e-mail containing the

main findings

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More info?

Our e-invoicing flyer Available in the room

Ask for it

Our article in Indirect Tax Briefing Issue April 2011, available via EY Insights app

in Apple and Android app stores

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Let’s talk individually

Enjoy the “Apero”

If you have an e-invoicing project or are moving towards such

a project, we would be pleased to act as your sounding

board in a one-hour meeting free of charge.

If you are interested, we have foreseen time slots to meet

with you in our offices in Ghent, Antwerp and Brussels.

Please note your preference down on the evaluation forms.

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Our EY EMEIA Center of Excellence

► We use a multidisciplinary team, i.e. with representatives from both Tax and Advisory, led by Marc Joostens, partner Indirect Taxes.

► Within VAT, Marc has specialized in electronic invoicing and archiving. Giving his experience and expertise, Marc leads an E-invoicing Center of Excellence, a central hub of e-invoicing subject matter resources from both VAT and Advisory that support EY teams globally.

► Marc has advised a large number of Belgian and international clients in validating the VAT compliance of their e-invoicing and e-archiving solutions. Next to this, Marc has played a leading role in advising policy makers in this matter, both on a European and Belgian level. In this respect, Marc has facilitated and lead the study that has been performed for the European Commission with regard to the European rules on e-invoicing and e-archiving.

► In order to guarantee a smooth execution of the project, Marc will from a VAT side, be assisted by Matthias Penninck, Senior Manager VAT, and one or more (senior) consultants. Over the past decade, Matthias also has advised a large number of Belgian and international clients in validating the VAT compliance of their e-invoicing and e-archiving solutions.

► From the advisory side, Tim Wulgaert, Director, and Andy Deprez, Partner, are both part of the E-invoicing Center of Excellence and have extended experience in supporting clients with their IT (security), project and process issues with regard to e-invoicing.

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Engagement partner

Marc Joostens

Matthias Penninck

Project Manager + VAT fieldwork

Tim Wulgaert

Business Process Fieldwork

Andy Deprez

Quality Assurance

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Marc Joostens

Tel.: +32 2 774 91 11 Email: [email protected]

Follow us: www.twitter.com/EY_Belgium

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Assurance | Tax | Transactions | Advisory 2012 Ernst & Young Transaction Advisory Services All rights reserved.

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