Simpler EU VAT Invoicing: The EU has given businesses a wonderful gift at the entrance of the New Year. This is the most modern yet simpler rules on VAT invoicing that has taken into effect January 1 of this year. This is to be implemented to reduce compliance costs and to help cut red tape for companies.
Highlights of the Modern EU VAT Invoicing Process
Simpler EU VAT Invoicing: The new legislation highlight two areas namely the cash accounting and the electronic invoicing system, which are procedures believed to add convenience and savings for many companies registered in the EU region.
The Electronic Invoicing System
Common rules will be applied to both paper and electronic invoicing system. This implies the elimination of pre-conditions like e-signatures and electric data interchange by any of the Member States to create legal certainty with greater simplicity for cross border enterprises.
In addition, these invoices could be electronically stored and storage time would still be the same for both systems, even if the original has been submitted and received on paper.
The EU believes that with this invoicing approach offered to registered companies, they will appreciate the lower postage costs, the fewer errors, the reduced printing costs, and the shorter payment delays it will provide.
In summation, approximately €18 billion is to be saved if and only if all businesses will adapt this offered modern invoicing system due to the reduced bookkeeping costs. As a result, it will then serve as an additional incentive that will ease the way for more businesses to be convinced to make this switch.
New Accounting Provisions
The other highlight offered by the new VAT invoicing system, is the new cash accounting provision. This aims to ease the cash flow for companies and businesses that have less than €2 million annual turnover.
It specifies that these SMEs are only obliged to declare the VAT only after it has been paid by the customer, rather than the previous practice of declaring it upon issuance of the invoice. In this case, even the smallest business registered will not be bankrupt because of these VAT payments.
However, it is left upon the discretion of the Member States if they are to adopt this cash accounting option, but it would be too difficult to imagine them not acknowledging and accepting this offer because the backbone of those hardly hit by the past economic crisis are often these SMEs.
Leaders of the EU understand that a more business-friendly environment is needed if Europe wishes to hasten their plan of economic recovery and growth. Therefore, it is inevitable for EU to implement reduce national divergences, cut compliance costs, and remove administrative burdens, which is the gist of what these simpler EU Vat invoicing is offering.