Technology and software companies face growing challenges from electronic invoicing requirements as countries introduce differing tax reporting rules, deadlines and data standards, according to professional services firm EY.
The firm said e-invoicing, increasingly becoming the global norm for value-added tax (VAT) reporting, was creating a broader operational challenge for businesses operating across multiple jurisdictions, requiring changes to systems, customer processes and data management.
Deirdre Hogan, partner in tax and law at Ernst & Young Business Advisors, said the developments also presented an opportunity to improve wider business operations.
“The spread of e-invoicing is an opportunity to address wider issues related to transactional reporting and data quality that will benefit the enterprise overall,” she said.
Technology companies and software-as-a-service providers are particularly exposed because they can supply digital services across borders from a single location, while VAT is generally payable in the country where the customer is based, even when the supplier has no permanent establishment there.
However, countries apply different rules on which transactions must be reported, what information must be provided and how invoices are transmitted to tax authorities.
Many existing requirements focus on domestic business-to-government and business-to-business transactions involving locally established companies, while cross-border transactions and business-to-consumer sales are often excluded.
This means companies may have VAT registrations in countries with mandatory e-invoicing rules without having local legal entities, leaving them uncertain about which obligations apply.
EY warned that businesses could underestimate their exposure if they assume current exemptions will remain in place.
In the European Union, cross-border transactions between member states are expected to fall under mandatory e-invoicing requirements from 2030 under the proposed VAT in the Digital Age (ViDA) reforms, potentially bringing more technology companies within scope.
Luigi Bucceri, principal in indirect tax at Ernst & Young LLP, said keeping track of changing requirements demanded ongoing effort from tax teams.
“Knowing what is happening is crucial, but it requires a great deal of knowledge transfer and effort,” he said, adding that tax leaders should use alerts, articles and webcasts to remain informed.
“You can’t assume that what was true yesterday or is true today will be true tomorrow,” he said. “Legislation changes, business operations change.”
EY said companies should take a strategic approach by improving data readiness and governance rather than treating e-invoicing solely as a compliance exercise.
Its cloud-based Global Tax e-Invoicing Solution helps businesses generate and process transactions electronically for submission to tax authorities.