Revenue News: Update on Electronic invoicing and other e-briefs

Wednesday, February 20, 2013

by Nick Ryan

There has been a flurry of activity by Revenue and a number of e-briefs released over the winter period on a number of issues. The most notable was e-brief 67/2012 covering the changes to the rules for invoices.
This e-brief outlines the changes to VAT invoicing rules to be introduced with effect from 1 January 2013. These changes follow those announced in the VAT Directive issued in July 2010, the aim being to simplify the invoicing regulations and adapt a uniform approach within the EU by January 2013. The primary focus of these changes introduced in January 2013 is on electronic invoicing and the e-brief outlines what is required by a business in order to be compliant with the invoicing directive and how the changes will provide for equality between paper and electronic invoicing.
Specific conditions have been set out which include the need for a prior agreement between the issuer and the recipient that invoices (and other documents) may be issued electronically. How this agreement should be set out or managed is unclear; will a side agreement be required or can a business refer to the process as part of its engagement/contract terms or will there be a need for a signed acceptance by the recipient and does this have to be on paper or will an email acknowledgement do? What is the position for one off customers or occassional customers? What is the procedure when the recipient does not agree or does not acknowledge their agreement? Has the issuer to issue paper invoices to these customers when they might be issuing all others electronically? A lot of questions, a little less clarity.
I believe that a business wishing to issue invoices electronically will need to be prepared to bite the bullet and apply common sense. They should also be prepared to argue their corner if Revenue challenge what they have put in place. In my view, if a business can clearly show that the processes they apply ensure, as best as is humanly possible, that VAT is accounted for correctly then this should be sufficient. For notification purposes I would rely on confirmation within my Terms and Conditions or contract that invoices, and other documents, will be transmitted electronically and provided in accordance with the current VAT legislation. I am not convinced a recipient of an invoice has the right to dictate the format though should be able to state a preference that enables them to fulfill their VAT accounting and reporting obligations.
In conjunction with this there are the usual system requirements, management of records including format and storage that need to be addressed and it is evident that any business opting for electronic invoicing will need to ensure their management and compliance systems are both effective and acceptable to Revenue. This does create a concern as surely there is a need for Revenue to provide clarity on what they will accept.
An interesting condition is the requirement for both parties to ensure the “authority of the origin” and “integrity of content” together with insurance over the audit trail. There is still a tendency by Revenue to fallback on the usual suspects of advanced technologies and EDI signatures which for some provide for both a hindrance and high cost just to achieve the simplicity of issuing an invoice electronically. The question still arises, is an invoice emailed in PDF format acceptable? In PDF format the invoice can not be modified or changed, a copy can be retained both within the issuer, and recipients, electronic system as well as a paper copy. Does it meet the authenticity of origin? Origin means something becoming from the original i.e. a copy. I digress.
How the issuer can ensure that the recipient meets these requirements/obligations is unclear. If the recipient does not does this then mean Revenue can prevent a business form issuing invoices electronically. At what point does “control” stop?
Looking at all this can muddy the actual purpose itself, the invoice is a demand for payment in respect of a supply of goods/services. In my view an invoice issued in PDF format does meet the authority of the origin and clearly supports the integrity of content.
I am all in favour for simplification in process as by doing so can reduce cost but I am not convinced the changes announced provide for this and would recommend that any business electing to take this route should seek guidance on how these conditions can be met to the satisfaction of Revenue.

Other releases included:

eBrief No. 05/2013: VAT Treatment of Dances which further clarifies the VAT position for dances and confirms it includes all public dances which are open to the public and where a charge for admission is made. In this circumstance the admission charge is a taxable supply.

eBrief No. 04/2013: VAT Treatment of eServices and Broadcasting: This provides an update to Revenue’s leaflet to clarify the changes to be introduced from 1 January 2015 covering the place of supply rules for supplies to private individuals.This confirms that the place of supply is where the private individual is established and provided for the management of the accounting of VAT by the suppliers depending on their status as either established in the EU or a non EU supplier with an EU establishment or, not established in the EU. VAT will be charged at the rate applicable to the services in each Member State but collected in Mini One Stop Shops (MOSS) in the Member State where the supplier is established. Any businesses affected by this will need to prepare their accounting systems to ensure they can meet these compliance and VAT accounting requirements.

eBrief No. 72/2012: Value-Added Tax – Section 56 Zero-Rating of Goods and Services – Interpretation of total turnover for the purposes of determining if an applicant’s qualifying turnover exceeds 75% of total turnover: This reinforced the application of the 13A procedure under the current legislation. The e-brief also confirms the exclusion of services as listed in s33(5) of the Value Added Tax Consolidation Act 2010 which are the old 4th Schedule services. It also confirms that sales made outside of the State to a location outside of the State are also excluded.

eBrief No. 71/2012: VAT – Reduction in the Farmers’ Flat-rate Addition – With effect from 1 January 2013 the flat-rate addition will be reduced from 5.2% to 4.8%.

eBrief No. 70/2012: VAT treatment of the Hiring or Leasing of Means of Transport: This confirms further changes regarding the place of supply of services rules as introduced as part of the VAT Package in January 2010. Where a vehicle/means of transport is hired to a non taxable person for a period of more than ninety days then the place of supply is where the non taxable person is established. For business customers the place of supply is also where they are established. The notable difference being there will be a requirement for the transport hirer to register for VAT in the non taxable person’s place of establishment which could then impact on any hires to taxable persons.
The position differs for the hire of a boat in that the place of supply is where the boat is made available for the hiree’s use which will therefore require the hirer to register for VAT in that place if they are not already registered there.

Should you have any questions on the above e-briefs or require guidance on a particular issue in relation to them then please contact Nick at 0238838181 or advice@thevatpractice.ie

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