E-Invoice: where are we now and where are we going?

When we talk about E-Invoicing, we must agree on terminology. For the purposes of this article, an E-Invoice means an electronic document that is processed digitally from issue to archiving. Generating and e-mailing an unstructured invoice in the PDF or Word format does not qualify as electronic invoicing. Images of invoices, for instance, in the JPG format, and scanned invoices do not qualify as electronic invoices. Thus, in summary, an E-Invoice is an invoice that is issued, transmitted, and received in a structured, prescribed format that enables its automatic and electronic processing as defined in Directive 2014/55/EU. The e-invoicing process includes the online exchange of an E-Invoice document by the supplier and the buyer.

Starting from 1 July 2017, invoices in the framework of public procurements in Lithuania must be submitted through the E-Invoice system of the Centre of Registers that was launched in 2015. Issue of E-Invoices in the private sector in Lithuania is not yet mandatory. The E-Invoice system is used by contracting authorities and suppliers of goods, services and works that perform public procurement contracts. There is the requirement to use electronic signatures on all transaction documents.

The E-Invoice system has a variety of functions. The system is important to the following main users:

Electronic value added tax invoices, credit and debit documents, proforma invoices, etc. are received and submitted online via this system. In April 2019, Lithuania joined the PEPPOL (Pan-European Public Procurement Online) network. The PEPPOL channel is intended for the international exchange of electronic documents. Thanks to this global network, companies can exchange key documents with all entities registered with the platform.

The following main advantages of passing from paper invoices to E-Invoices are mentioned, and some of these give rise to certain doubts:

Despite the advantages of the E-Invoice system currently in use in Lithuania, opinions on its limited functionality and additional administrative and financial burden on companies have become common too. It was therefore decided to upgrade the system considerably: to improve the functionality, attractiveness, reliability, and usability of the system and in this manner minimise the number of invoices issued in other manners and improve the management effectiveness of the public and private sectors. Plans are to considerably upgrade the old system by changing the technological platform and encouraging businesses to integrate to the European e-invoicing infrastructure by joining the PEPPOL network. The aim is to ensure that the invoices issued to public sector entities and other contracting authorities are compliant with the European standard on e-Invoicing.

The launching of the new system, which will replace E-Invoice, is planned on 1 July 2024. The new system will be called SABIS, which stands for the General Information System of Invoice Administration. One of the novelties is that all invoices intended for the public sector will have to be submitted using the SABIS. To date, the requirement was only applicable to public procurements. 

The SABIS is expected to provide a user-friendly environment, improved security, and an increased number of users logged in at a given time. Plans are to implement solutions that ensure a unified automated process―from contract signing to the invoice payment stage. Historical data from the E-Invoice system will be exported to the SABIS.

It is expected that the new system will help to ensure that 95 percent of invoices issued to the public sector will be provided electronically. The changes are implemented with consideration of the Directive of the European Parliament and of the Council on the use of electronic invoices in public procurements.

It can therefore be claimed that electronic invoices are becoming increasingly popular in Europe. Out of the three Baltic countries, Estonia is ahead in the use of E-Invoices, but a considerable growth of the volume of electronic invoices in Europe is forecast in 2024-2028. Currently, the focus is on the issue of invoices between companies and public authorities. However, the practice of e-invoicing is being gradually adopted in business relationships. Analysis of the changes in Europe shows that the requirement to use E-Invoices for business entities is likely to be enforced in Lithuania in the foreseeable future.

One of the major reforms is currently being prepared: the European Commission proposed amending the VAT Directive ViDA (VAT in the digital age). The main purpose of the reform is to minimise the VAT gap and the number of fraud instances and to simplify certain VAT procedures. The reform will also affect most Lithuanian companies. One of the key ViDA proposals is to introduce the requirement that VAT invoices for all goods/services transactions between EU companies must be electronic and declared almost in real time. This means that a company that sells goods or services to EU companies or purchases goods or services from EU companies will have to use E-Invoices that are understood as a set of metadata in the prescribed format. Any other formats will not be accepted, meaning that companies that will have to issue or accept E-Invoices will have to upgrade their accounting and management systems so that they are able to read metadata of E-Invoices. To date, there is no clear stance on whether E-Invoices will be mandatory for transactions within a single country. Another novelty is related to the invoice issue term. It is proposed that an E-Invoice must be issued within two days of the taxable moment. There are also other novelties. The unified EU system of electronic invoice issue and digital reporting system is expected to reduce instances of VAT-related fraud.

It should be emphasised that discussions on the changes referred to above are still underway and that they have not been approved or included in the Law on Value Added Tax of the Republic of Lithuania. The first planned changes are likely to become effective from 2025, and it is aimed that E-Invoices become mandatory from 1 January 2028. The novelties are highly likely to be adopted, and businesses should therefore begin relevant preparations because the changes will in any case call for additional IT expenses companies will have to adapt their accounting systems so as to ensure the appropriate data transmission and receipt.