Code of Practice on Electronic Invoicing in the EU

Document type: CWA Document subtype: Document stage: Document language: E

CEN/WS eInvoicing Phase 3

Date: 2011-11

CEN Workshop AgreementTC WI

Secretariat: NEN

Code of Practice on Electronic Invoicing in the EU

Status: for public review (23 November 2011-23 January 2012)

ICS: 35.240.60 Descriptors:

Contents

Page 1 Foreword ... 3 2 I. Introduction ... 3 3

A. References and Resources ... 4 4

B. Core Principles ... 4 5

II. Code of Practice for Trading Parties ... 5

6

A. When issuing or receiving unstructured data electronic invoices (e.g. pdf), taxable 7

persons should: ... 5 8

B. When issuing or receiving structured data electronic invoices (e.g. xml or EDIFACT) 9

taxable persons should: ... 6 10

III. Code of Practice for Service Providers ... 7

11

IV. Code of Practice for Public Administrations ... 7

12 13

Foreword

14

This CEN Workshop Agreement has been drafted and approved by a Workshop of representatives of 15

interested parties on 8 November 2011, the constitution of which was supported by CEN following the 16

public call for participation made on 9 February 2010. 17

A list of the individuals and organizations which supported the technical consensus represented by 18

the CEN Workshop Agreement is available to purchasers from the CEN Management Centre. These 19

organizations were drawn from the following economic sectors (………..). 20

The formal process followed by the Workshop in the development of the CEN Workshop Agreement 21

has been endorsed by the National Members of CEN but neither the National Members of CEN nor 22

the CEN Management Centre can be held accountable for the technical content of the CEN 23

Workshop Agreement or possible conflict with standards or legislation. This CEN Workshop 24

Agreement can in no way be held as being an official standard developed by CEN and its members. 25

26

I.

Introduction

27

This Code of Practice is a response to European Commission Communication COM (2010) 712 of 2 28

December 2010, specifically Action 3.1: 29

“CEN should develop by end of 2011, a Code of Practice taking into account the work of the 30

Expert Group on e-invoicing. This Code of Practice, to be adopted by trading parties, service 31

providers and public authorities, should include a consistent terminology and a definition of 32

roles and responsibilities of the distinct actors within the e-invoicing process.” 33

This Code of Practice provides a framework of best practices for: 34

 Taxable persons in the EU who wish to send or receive electronic invoices, whether 35

as unstructured data (Section 2.A) or structured data (Section 2.B); 36

 service providers who assist those businesses (Section 3); and 37

 public administrations (Section 4). 38

These best practices, if followed, will enable practitioners to comply with the relevant legislation and 39

contribute to the European Commission‟s, „A Digital Agenda for Europe‟ initiative. 40

The best practices introduced in this document are expanded upon in the CEN CWAs produced by 41

the CEN Workshop on eInvoicing phase 3. 42

This Code of Practice is intended to apply to all scenarios in which electronic invoices are exchanged, 43

including: 44

 2-Corner Model (direct bilateral transmission of electronic invoices from one trading 45

partner to another); 46

 3-Corner Model (both trading parties are connected to a single service provider); and 47

 4-Corner Model (each trading party is connected to or supported by its own service 48

provider). 49

While this Code of Practice is intended to address each of the scenarios, trading parties should not be 50

compelled to use any scenario and should remain free to use the scenario most appropriate for that 51

trading party‟s business. 52

A.

References and Resources

53

This Code of Practise incorporates by reference the following foundation documents, which are 54

understood as part of the Code of Practice: 55

1) Directive 2006/112/EC (as amended by Directive 2010/45/EU) on the common system of 56

value added tax as regards the rules on invoicing and Member State implementation thereof. 57

2) Member State legislation impacting on invoicing. 58

3) European Commission Communication COM (2010) 712, „Reaping the benefits of electronic 59

invoicing for Europe‟. 60

4) European Commission‟s Directorate-General Taxation and Customs Union Guidelines and 61

explanatory notes. [Note: Insert full title when done]. 62

5) CEN CWA No. ___________ Code for Good Practice: e-Invoicing Compliance Guidelines 63

“the Compliance Guidelines”). [Note: Title to be reviewed and CWA number to be inserted 64

when CWA is published by CEN]. 65

6) CEN CWA No. __________ E-invoicing SME Enablement (the “E-invoicing SME 66

Enablement CWA”). [Note: Title to be reviewed and CWA number to be inserted when CWA 67

is published by CEN]. 68

7) CEN CWA No. _____________ Conformance Criteria for Interoperability between Electronic 69

Invoicing Services (the “Conformance Criteria”) and Model Interoperability Agreement (the 70

“Model Interoperability Agreement”). [Note: Title to be reviewed and CWA number to be 71

inserted when CWA is published by CEN]. 72

8) CEN CWA No. _____________ Guide for a Core European Invoice Data Model with 73

UN/CEFACT Implementation Guideline. 74

9) CEN Phase 3 E-invoicing Glossary of Terms attached hereto. 75

B.

Core Principles

76

The best practices introduced herein are based on the following core principles applicable to 77

businesses, service providers and public administrations. These principles are an evolution of those 78

originally proposed by the EU Expert Group on electronic invoicing and focus on the practical 79

implementation of electronic invoicing. 80

1) Legislative compliance: electronic invoicing solutions must comply with the relevant 81

national legislation adopted pursuant to Directive 2006/112/EC (as amended by 82

2010/45/EU). The Directive recognizes the obligation for invoices to accurately reflect actual 83

supplies of goods and services and therefore requires that the authenticity of the origin, the 84

integrity of the content and the legibility of invoices are insured from their issue until the end 85

of the period of storage. In practical terms this will mean that a taxable person will have: 86

i) an invoice that represents a supply of goods or services; 87

ii) measures to demonstrate authenticity of origin of the invoice; 88

iii) measures to demonstrate integrity of content of the invoice; and 89

iv) measures to ensure legibility of the invoice. 90

2) Solution neutrality: use of particular processes and/or technologies is not a requirement to 91

adoption of electronic invoicing and no indication should be given that one process and/or 92

technology is favoured over another. Trading parties have freedom of choice over current 93

and future electronic invoicing solutions to meet their specific business needs consistent with 94

their legislative obligations. 95

3) Auditability: Taxable persons must keep records and accounts in sufficient detail for their 96

financial affairs to be verified by tax authorities and external auditors. 97

4) Proportionality: Taxable persons are not required to implement control measures for audit 98

and/or compliance purposes that are disproportionate to their individual circumstances. 99

Circumstances that must be taken into account include, but should not be limited to, the size, 100

activity and type of taxable person and should take account of the number and value of 101

transactions as well as the number and type of suppliers and customers. 102

5) Interoperability: Taxable persons, service providers and public administrations should 103

promote electronic invoicing solutions and processes that maximize interoperability among 104

all participants, such as trading parties and service providers using royalty free electronic 105

invoicing standards promulgated by international standards organizations. 106

6) Responsibility: Taxable persons remain responsible for ensuring that an invoice was 107

issued and complies with the application legislation. 108

II.

Code of Practice for Trading Parties

109

A.

When issuing or receiving unstructured data electronic invoices (e.g. pdf),

110

taxable persons should:

111

1) Ensure the invoice represents an actual supply of goods or services and is stored with 112

appropriate records establishing this fact in accordance with the business‟ internal control 113

processes. Business internal controls that already achieve this in a paper environment 114

should be sufficient when invoicing electronically. 115

2) Ensure that the invoice contains all content required by the applicable legislation. 116

3) Determine how the authenticity of the origin, the integrity of the content and the legibility of 117

the invoice will be ensured. Taxable persons are free to choose how these requirements will 118

be met. 119

i) Examples of how authenticity of the origin and integrity of the content can be met 120

include business controls that create a reliable audit trail between an invoice and a 121

supply, or technologies such as EDI or qualified electronic signatures. 122

ii) Practical information on how these methods can ensure authenticity and integrity can be 123

found in the Compliance Guidelines and the E-invoicing SME Enablement CWA. The 124

Compliance Guidelines also provide practical information on achieving legibility. 125

4) Confirm that the intended invoice recipient would accept a specific format of electronic 126

invoices. 127

5) Store the electronic invoices and any other evidence as may be required to demonstrate 128

authenticity and integrity for the period required by law. 129

6) If using one or more service providers, there should be agreements with them that offers 130

trading parties confidentiality, data use and other protections complying with conformance 131

criteria such as the CEN Conformance Criteria. 132

7) Consider migrating to using structured invoices as an enabler to more fully reaping the 133

benefits of electronic invoicing, ideally a structured invoice based on an open, royalty free 134

standard. 135

8) Be aware of all facets associated with their particular electronic invoicing circumstances as 136

documented in the CEN Compliance Guidelines and implement controls to counter any 137

possible problem. 138

9) Determine if other commercial needs warrant the use of an additional agreement or 139

amendment to existing commercial agreement when using electronic communications to 140

send commercial and pricing information set forth in invoices. For example do existing 141

confidentiality agreements address the use of electronic data? This is a business decision 142

between the issuer and receiver of the electronic invoice and not required for VAT 143

compliance. 144

10) Promote the use of a consistent terminology for electronic invoicing by using the Glossary of 145

Terms. 146

B.

When issuing or receiving structured data electronic invoices (e.g. xml or

147

EDIFACT) taxable persons should:

148

1) Ensure the invoice represents an actual supply of goods or services and is stored with 149

appropriate records establishing this fact in accordance with the business‟ internal control 150

processes. Business internal controls that already achieve this in a paper environment 151

should be sufficient when invoicing electronically. 152

2) Ensure that the invoice contains all content required by the applicable legislation. 153

3) Determine how the authenticity of the origin, the integrity of the content and the legibility of 154

the invoice will be ensured. Taxable persons are free to choose how these requirements will 155

be met. 156

i) Examples of how authenticity of the origin, the integrity of the content can be met 157

include business controls that create a reliable audit trail between an invoice and a 158

supply, or technologies such as EDI or qualified electronic signatures. 159

ii) Practical information on how these methods can ensure authenticity and integrity can be 160

found in the CEN Compliance Guidelines and the E-invoicing SME Enablement CWA. 161

The CEN Compliance Guidelines also provide practical information on achieving 162

legibility. 163

iii) The exclusive use of technology based solutions is not suitable to entirely replace 164

maintenance of business controls and accounting systems to demonstrate that the 165

invoice represents an actual supply of goods or services. Even if EDI or electronic 166

signature are used to ensure authenticity of origin and integrity of content, business 167

controls are needed to show that the invoice represents a supply of goods or services. 168

4) Confirm that the intended invoice recipient would accept a specific Format of electronic 169

invoice and has the appropriate technology to receive and process structured data electronic 170

invoices. The issuer and receiver of the electronic invoice must agree in advance on the 171

Format that will be used, the transmission protocol to be used and the format of the 172

electronic documents to be exchanged. Preferably, this agreement should be explicit to 173

facilitate subsequent evidence, but is not required to be in writing for purposes of VAT 174

compliance. 175

5) Store the electronic invoices, the business control documents, and any other evidence as 176

may be required to demonstrate authenticity and integrity for the period required by law. 177

6) If using one or more service providers, there should be agreements with them that offer 178

trading parties confidentiality, data use and other protections complying with conformance 179

criteria such as the CEN Conformance Criteria. 180

7) Be aware of all facets associated with their particular electronic invoicing circumstances as 181

documented in the CEN Compliance Guidelines and implement controls to counter any 182

possible problem. 183

8) Determine if other commercial needs warrant the use of an additional agreement or 184

amendment to existing commercial agreement when using electronic communications to 185

send commercial and pricing information set forth in invoices. For example do existing 186

confidentiality agreements address use of electronic data? This is a business decision 187

between the issuer and receiver of the electronic invoice and not required for VAT 188

compliance. 189

9) The Format in which invoices are held may be converted to other formats in a controlled and 190

auditable process, providing that the VAT information remains correct (i.e. the integrity of the 191

content is not affected). 192

10) Promote the use of a consistent terminology for electronic invoicing by using the Glossary of 193

Terms. 194

III.

Code of Practice for Service Providers

195

1) Service Providers should provide electronic invoicing solutions that enable their clients to 196

fulfil their legal obligations. 197

2) Service Providers should conduct their operations in accordance with the Conformance 198

Criteria or similar codes providing trading parties equivalent protections and promulgated by 199

an international standards organization. 200

3) Service Providers should use and support royalty free standards for invoice content 201

published by international standards organizations, including as an example the 202

UN/CEFACT Cross Industry Invoice. 203

4) Service Providers operating in a four corner model should interoperate with other service 204

providers by use of the CEN Model Interoperability Agreement or an agreement that offers 205

substantially equivalent protections to trading parties and is promulgated by an open and 206

neutral organization. 207

5) Service Providers operating in a three corner model should offer fair and reasonable terms to 208

those trading parties who have been requested to contract with the Service Provider. Those 209

terms and conditions should offer the trading party substantially the same protections as 210

afforded in the Conformance Criteria. 211

6) Service Providers must respect the confidentiality of the data they transmit or handle and 212

must not use data except in furtherance of the services authorized by customers. Any 213

deviations from this must be agreed in advance with each of the trading partners. 214

7) Service Providers should promote systems that allow all trading parties to have a single point 215

of access for receiving or sending electronic documents via a service provider or access 216

point selected by the trading party. 217

8) Service Providers should promote the use of a consistent terminology for electronic invoicing 218

by using the Glossary of Terms. 219

IV.

Code of Practice for Public Administrations

220

1) All public administrations should encourage adoption of this Code of Practice by businesses 221

and service providers. 222

2) Public administrations should promote the use of a consistent terminology for electronic 223

invoicing by using the Glossary of Terms. 224

3) Public Administrations should develop and implement practices consistent with this Code of 225

Practice and the principles of Directive 2010/45/EU, including: 226

i) If a taxable person already uses business controls with paper invoices to establish a 227

reliable audit trail between the invoice and a supply of goods and services and those 228

business controls ensure authenticity of origin and integrity of content, then those 229

business controls also suffice to demonstrate authenticity of the origin and the integrity 230

of the content of the electronic invoice and no additional technologies or processes are 231

to be required for compliance. 232

ii) Public Administrations should publish clear and uniform guidelines on what constitutes 233

business controls that create a reliable audit trail between the invoice and a supply of 234

goods and services and ensure authenticity of origin and integrity of content. 235

iii) Public Administrations should not require businesses to implement control measures for 236

audit and/or compliance purposes that are disproportionate to their individual 237

circumstances. Circumstances that must be taken into account include, but should not 238

be limited to, the size, activity and type of taxable person and the number and value of 239

transactions as well as the number and type of suppliers and customers. 240

iv) In order to ensure that technologies and business processes can freely evolve, and to 241

allow enterprises to optimize these business processes and administration in a manner 242

that best suits their unique business environments, Public Administrations should allow 243

enterprises to freely choose how they structure and operate the relevant business 244

processes within the framework set out in this Code of Practice. 245

v) Public Administrations should mutually accept the business control framework and other 246

recognized implementation methods of trading parties involved in EU cross-border 247

transactions. 248

vi) Public Administrations should develop common and transparent audit guidelines 249

consistent with this Code of Practice. 250

vii) Public Administrations should allow conversion of electronic invoices to other formats, 251

providing this has been done in a controlled process ensuring that the integrity of the 252

content is not affected (i.e. the information required for VAT compliance purposes 253

remain correct). 254

TC WI :2011 (E)

CEN Phase 3 E-invoicing Glossary of Terms

Consolidated Glossary

Term

Definition

1. 2-Corner Model See Bilateral Exchange Model

2. 3-Corner Model An exchange model where Suppliers and Buyers of are connected to or communicate with a single service provider for the dispatch and receipt of messages. Typically, the Buyer selects the single service provider and requires its Suppliers to connect to, or communicate with, that service provider in order to exchange messages.

3. 4-Corner Model An exchange model where Suppliers and Buyers are connected to or supported by their own service provider.

4.

Advanced electronic signature (AES)

Advanced electronic signature (AdES) means an electronic signature which meets the following requirements: a) it is uniquely linked to the signatory; b) it is capable of identifying the signatory; c) it is created using means that the signatory van maintain under its sole control; and d) it is linked to the data to which it relates in such a manner that any subsequent change of the date is detectable. Source: Directive 1999/93/EC Article 2 (2nd Paragraph)

5.

Authentication The process of verifying the identity of a person, organization or system.

6. Authenticity of origin

Means the assurance of the identity of the issuer of the invoice. Source: Article

233(1) Directive, 2010/45/EU

7.

Bilateral

exchange model

A model for the exchange of information directly between a Buyer and a Supplier in a one-to-one relation.

8.

Buyer An organization to which the Supplier makes a supply and that may be obligated to validate and store an invoice, as well as where applicable being required to report and declare and being entitled to deduct/reclaim applicable input tax VAT. (Note: Referred to as “Customer” in Directive 2006/112/EC; the terms Buyer is chosen to avoid confusion with the customer of an e-invoicing service provider)

9. Certification Authority (CA)

A CA is an entity which issues digital certificates identifying other parties.

10.

Conversion The act of changing the Format of an electronic document from the Format of the Sender to the format of the recipient (Format Conversion), or of content (e.g. different code list or units of measure) in a manner that does not alter the information represented by the document (Content Conversion).

11. Digital certificate See the following two definitions:

1) ISO/IEC 9594-8: “public key of a user, together with some other information rendered unforgeable by digital signature with the private key of the certification authority which issued it.

2) EU Directive 1999/93/EC: “an electronic attestation which links signature-verification data to a person and confirms the identity of that person.

12. EDI Electronic data interchange is the electronic transfer, from computer to computer, of commercial and administrative data using an agreed standard to structure an EDI message. 1994/820/EC (Annex 1, Art 2.1). For purposes of clarity, EDI systems may use any type of structured messaging including UN/EDIFACT and XML.

13.

EDI message An electronic data interchange message (EDI message) consists of a set of information, structured using agreed formats, prepared in a computer readable

TC WI :2011 (E)

10

form and capable of being automatically and unambiguously processed.

14.

E-invoicing

Service Provider or Service Provider

An organisation that, based on an agreement, performs certain processes in relation to the Electronic Invoice on behalf of a Buyer or Supplier, or that is active in the provision of support services necessary to realise such processes.

15.

Electronic invoice Means a document or dataset that can be considered an invoice under Council Directive 2006/112/EC as modified by 2010/45/EU and which has been issued and received in any electronic Format. Source: Directive 2006/112/EC as modified by 2010/45/EU

16. Electronic Signature

Electronic signature means data in electronic form which is attached to or logically associated with other electronic data and which serves as a method of authentication. Source: Directive 1999/93/EC

17.

Form With respect to an electronic invoice, whether it is paper or electronic. The Format of an electronic invoice does not affect its Form.

18.

Format The method of organising electronic data in an electronic document.

19. Integrity of content

Means that the content required under applicable law has not been altered.

Source: Article 233(1) Directive, 2010/45/EU

20.

Interchange Agreement

The provisions of Interchange Agreements are intended to govern the rules of conduct and methods of operation between Service Providers in relation to the interchange of electronic messages.

21. Interoperability A property referring to the ability of diverse systems and organizations to work together (inter-operate). The term is often used in a technical systems engineering sense, or alternatively in a broad sense, taking into account social, political, and organizational factors that impact system to system performance.

22. Invoice data Data used to create the electronic invoice prior to its issuance or extracted from the electronic invoice following its issuance.

23.

Invoice header data

Data that relates to the whole invoice, e.g. invoice date, invoice number, seller and Buyer identification, name and address, bank account details etc. Some data is typically made available at header level in an invoice because it may be valid for all detail lines, but may be overridden as necessary by making the data available at detail line level, e.g. discount, currency code, VAT rate, delivery address, tax point, etc.

24.

Invoice issuer The organisation that creates the invoice.

25.

Invoice line data Data that relates to the goods item or service being invoiced, e.g. goods item identification, quantity, price, description, etc… Some invoice line data may be made available in the header if it is valid for several invoice line items, but may be overruled at line level.

26. IP Network Internet Protocol is a series of standards from the Internet Engineering Task Force for exchanging data over the internet, a network of inter-communicating parties may agree to use it. Such networks may be publicly accessible or private.

27.

Issuer of an E-Invoice

The organisation issuing the electronic invoice (the Supplier or a party – a Service Provider or, in the case of Self-Billing, the Buyer – issuing the e-invoice in its name and on its behalf).

28.

Issuing an E-Invoice in name and on behalf of the Supplier

The process whereby an organisation other than the Supplier issues the invoice in the Supplier‟s stead without taking over the Supplier‟s accountability for that invoice vis-à-vis the Tax Administration. The issuing third party may be a Service Provider or, in the case of Self-Billing, the Buyer or its Service Provider.

29.

Legible Readable by human beings.

TC WI :2011 (E)

30.

Ordering Ordering is the collaboration that creates a contractual obligation between the Supplier and the Buyer.

31.

Payment The process in which the Buyer transmits to the Supplier the agreed monetary value (as the contra-performance) through their respective payment service providers or banks. The result of this process is an exchanged and agreed payment (transfer of monetary value), including the applicable tax.

32.

Public key The key of a user‟s key pair which is publicly known. It may be used: 1) to

validate a digital signature, 2) to encrypt confidential information for the owner of the other key of the pair: the private key.

33.

Purchase Order (PO)

Sent by the Buyer to the Supplier to inform him that he wishes to purchase goods or services.

34.

Procurement portal

Usually web-based interface of Buyer to which his Supplier have to be connected to be able to exchange transactions messages with the Buyer.

35.

Recipient The party receiving the invoice, usually the Buyer or purchasing party.

36.

Secure-signature-creation device

A signature-creation device which meets the requirements laid down in Annex III of Directive 1999/93/EC. Source: Directive 1999/93/EC Art. 2(6)

37.

Self-billed invoice Invoice issued by the Buyer in name and on behalf of the Supplier and sent to

or made available to the Supplier in relation to a specific supply.

38.

Self-Billing A method of invoicing whereby the Buyer issues the invoice in name and on behalf of the Supplier.

39.

Sender The party submitting the invoice, as a rule the Supplier or selling party.

40.

Service Provider See E-invoicing Service Provider.

41.

Storage period of an electronic invoice

The amount of time that applicable law requires the electronic invoice to be stored and available for audit.

42.

Structured

invoice document

(e.g. EDI or XML) Creation of a structured invoice document consists of the compilation of the required data into an agreed e-invoice message with a known structure, format and content such as is the case with EDI and XML messages. This means that contrary to the case with a paper document, where the receiver may well be unfamiliar with the format, with a structured invoice message the format is pre-defined and known to the parties involved.

43.

Supplier An organisation that supplies goods or services to the Buyer and that may be obligated to issue and store an Invoice, as well as where applicable to report, account for and pay output VAT.

44.

Tax

Representative

A person liable for paying the VAT for a taxable person.

45.

Trading Parties Means Suppliers and Buyers.

46.

Unstructured

invoice document

(e.g. PDF, JPEG, HTML or email) is an invoice created and sent or made available in an electronic format that cannot without prior interpretation (e.g. reading by a human being, scanning and/or optical character recognition) be automatically consumed by an external information system. As an alternative, a traditional invoice can also become an unstructured invoice document by scanning the paper invoice into an electronic document.

47.

Value Added Network (VAN)

Third-party network service provider that offers specialised security and trade related services to Trading Parties connected through the VAN.

TC WI :2011 (E)

12

Added Tax added to a product or service at that stage.

49.

Web Publication / Web Presentation

In the context of e-invoicing, a method of exchanging invoices with the Buyer by placing the electronic invoice on an agreed web site for download and subsequent archiving under the Buyer‟s control or, alternatively, making the invoice available for web-based consultation only without enabling download.