The French 2020 budget includes measures to implement mandatory e-invoicing to combat VAT evasion. A full report outlining the impact on taxpayers and the benefits for businesses of all sizes is yet to come. Meanwhile, businesses can prepare by observing the dates listed below and digitalising their invoicing processes.

On December 28, 2019 French President Emmanuel Macron promulgated the long awaited Budget Law for 2020 (law no. 2019-1479) adopted by the National Assembly and the Senate.

One highly anticipated provision of the Budget Law is Article 153, regarding the introduction of new digital tax controls to combat value-added tax (VAT) evasion. The Article states that invoice transactions which are subject to VAT must be issued in electronic form and the data contained therein must be transmitted to the tax administration. The Budget Law forecasts that these regulations, and therefore mandatory e-invoicing, will come into effect January 2023 at the earliest.

Government to outline impacts and benefits of mandatory e-invoicing

Article 153 includes, among other stipulations, the following pertinent information:

  • E-invoicing will become mandatory in France 1 January 2023 at the earliest, but not later than 1 January 2025. The obligation may be subject to a gradual roll-out plan based on the business size and industry of taxpayers;
  • The government must submit a report to the parliament no later than September 1st, 2020 outlining the most suitable technical, legal and operational solutions of data transmission to the tax administration. The report will take into account the impact this may have on the taxpayers. The report should outline the correlation between the gains of VAT recovery and expected benefits for businesses;
  • The implementation of mandatory e-invoicing will be contingent on France obtaining derogation by the EU Commission from Art. 395 of Directive 2006/112/EC (the VAT Directive).

E-invoicing model still to be determined

Article 153 does not define the method by which mandatory e-invoicing will be implemented, leaving that declaration on deck for the upcoming government report. The wording of the Article effectively means that any of the known models may be adopted:

  • Clearance – invoices must be approved by the tax administration prior to exchange between the trading parties;
  • Real-time reporting – invoices must be reported to the tax administration automatically and shortly after issuance and exchange between the trading parties; or
  • Interoperability – invoices must only be exchanged electronically, and the engaged software vendors will report the underlying data to the tax administration.

It is also plausible that a completely new model may be created in the French market. Although much remains to be unveiled and even decided about the impending laws, one can already conclude that the French Government leads by example with information transparency, announced timelines, openness to the potential e-invoicing model, and its reasons for endorsing mandatory e-invoicing.

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