New VAT invoicing rules

Article Date: 10 April 2012

The second Directive on VAT invoicing was adopted in July 2010 and its provisions have to be applied as from 1 January 2013. It aims to simplify VAT invoicing requirements and promote the uptake of e-invoicing.

It sets out to ensure the acceptance by tax authorities of e-invoices under the same conditions as for paper invoices and to remove legal obstacles to the transmission and storage of e-invoices.

The Commission has produced explanatory notes to explain the main changes to the requirements for paper and electronic invoices, the issue, content and storage of invoices.

Requirements for paper and electronic invoices

- Invoices must reflect an actual supply. Therefore the authenticity of the origin, integrity of content and legibility must be ensured. It is up to each taxable person to ensure this.

- Definition of an e-invoice. An electronic invoice needs to be issued and also received in any electronic format and must contain the elements as required by the VAT Directive as with a paper invoice.

- Customer acceptance. The use of an electronic invoice must be accepted by the recipient.

- Authenticity of origin. This means the assurance of the identity of the supplier or the issuer of the invoice. This is an obligation for the taxable person receiving the goods as well as for the taxable person making the supply

- Integrity of content (not altering the content of an invoice). This is also an obligation for both parties and they can both independently choose the way in they fulfill this obligation or can agree to use advanced electronic signatures, for example, to ensure the content is unchanged.

- Legibility. The invoice must remain humanly readable until the end of the storage period, on paper or on screen.

- Choice of means of ensuring the authenticity of origin, integrity of content and legibility. Both the supplier and the customer are free to choose how to do this and the choice should not be restricted by Member States.

- Business controls. These are the processes created, implemented and kept up to date to provide reasonable assurance on the identity of the supplier, that the VAT content has not been altered and on the legibility of the invoice.

- Reliable audit trail. For VAT purposes an audit trail should provide an auditable link between an invoice and a supply of goods or services.

- Advanced electronic signature and EDI. These are two examples of electronic invoicing technologies to ensure the authenticity of the origin and the integrity of the content and cannot be mandatory requirements.

- Point in time of issue and end of storage period. The period for which the authenticity of the origin, the integrity of the content and the legibility of the invoice must be ensured is from the time of issue until the end of the storage period.

The Member State where the supply takes place sets the invoicing rules except for cross-border supplies subject to the reverse charge and for supplies taxable outside the EU.

Changes have been made to the content of invoices to reduce burdens on business.

There are no major changes regarding the storage of invoices in the directive.

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