REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL assessing the invoicing rules of Directive 2006/112/EC on the common system of value added tax
Date: 2020-02-10
Institutions: Directorate-General for Taxation and Customs Union, European Commission
Subjects: VAT, administrative formalities, approximation of laws, electronic document, invoicing, national implementing measure, single market, small and medium-sized enterprises, tax harmonisation, tax offence

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 10.2.2020  COM(2020) 47 final  REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL assessing the invoicing rules of Directive 2006/112/EC on the common system of value added tax {SWD(2020) 29 final}  
 
 
1. Introduction 

Based on Article 237 of Directive 2006/112/EC1 (the VAT Directive), the Commission shall 
present to the European Parliament and the Council an overall assessment report, based on an 
independent  economic  study,  on  the  impact  of  the  invoicing  rules  applicable  from 
1 January 2013 and in particular the extent to which they have effectively led to a decrease in 
administrative burdens for businesses. It is in this framework that the Commission carried out 
an evaluation of the invoicing rules. 

The  evaluation  was  supported  by  an  independent  study  led  by  the  consulting  group 
Economisti Associati and resulted in the Final Report published in February 20192.  
The  evaluation  assessed  the  invoicing  rules  of  Council  Directive  2010/45/EU3  (the  Second 
Invoicing  Directive  or  SID)  and  in  particular  whether  they  contributed  to  the  four  general 
objectives set initially, namely: i) the reduction of the administrative burdens on businesses ii) 
the  reduction  of  VAT  frauds/impact  on  control  activities  iii)  the  proper  functioning  of  the 
Internal Market and iv) the promotion of SMEs.  

The  evaluation  followed  the  five  evaluation  criteria  of  the  Commission’s  Better  Regulation 
Guidelines4: relevance, effectiveness, efficiency, coherence and EU Added Value. 

2. Transposition and implementation of the Directive  

To establish a starting point for the evaluation, the consultant carried out an analysis of how 
the Second Invoicing Directive has been transposed and implemented by the Member States. 
This  analysis  focused  on  whether  Member  States  correctly  transposed  the  Directive  and 
measured the extent to which the national legal framework changed because of the Directive. 
For the sake of clarity the below summary of the analysis is divided in three thematic areas.   

2.1.  E-Invoicing 

The  Directive  introduced  three  main  changes  to  the  EU  legal  framework  for  electronic 
invoices  (e-invoices):  (i)  a  new  definition  of  e-invoice;  (ii)  the  principle  of  technological 
neutrality; and (iii) the principle of equal treatment among the paper and electronic invoices. 
The changes have been introduced evenly across the EU. Even when the national provisions 

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4  

Council Directive 2006/112/EC on the common system of value added tax, OJ L 347, 11.12.2006 , p. 1.  
Report on the evaluation of Invoicing Rules of Directive 2006/112/EC: 
https://publications.europa.eu/en/publication-detail/-/publication/745fa4fe-2db0-11e9-8d04-
01aa75ed71a1/language-en/format-PDF/source-search 
Council  Directive  2010/45/EU  of  13  July  2010  amending  Directive  2006/112/EC  on  the  common 
system of value added tax as regards the rules on invoicing, OJ L 189/1, 22.7.2010.  
For  more  information  please  see:  https://ec.europa.eu/info/law/law-making-process/planning-and-
proposing-law/better-regulation-why-and-how/better-regulation-guidelines-and-toolbox_en 

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are  slightly  different  from  the  text  of  the  Directive,  there  appear  to  be  no  problems  of 
incorrect transposition.  

More in particular regarding the definition of an e-invoice, the vast majority of Member States 
(24) introduced  the e-invoice definition in  their  national  legislation mirroring the one in  the 
Directive. In four Member States either the definition has not been introduced or is somewhat 
different  from  the  one  included  in  the  VAT  Directive.  Regarding  the  principle  of 
technological neutrality, it has been transposed uniformly and no Member State requires the 
use of defined e-invoicing technology. Although four Member States only accept e-invoicing 
solutions  explicitly  mentioned  in  the  national  legislation,  the  foreseen  options  are  defined 
broadly enough to ensure taxpayers’ freedom of choice. To guarantee the principle of  equal 
treatment  legislative  requirements  on  e-invoices  beyond  those  that  exist  for  paper  invoices 
were removed in all Member States5.  

2.2. 

Invoicing issuance and content 

The SID introduced a number of changes in the area of invoice issuance and content. The SID 
amended  three  specific  invoicing  regimes:  self-billing,  simplified  invoices  and  summary 
invoices. The SID also introduced changes to the invoicing requirements applicable to cross-
border  transactions  in  view  of  reducing  burdens  and  increasing  harmonisation.  The  main 
changes concern the applicable invoicing rules, time of issuance of invoices and the content of 
cross-border invoices.  

Overall,  the  Directive  displays  a  very  good  level  of  transposition.  The  mandatory 
requirements  of  SID  were  all  transposed  in  the  national  legislations.  In  addition,  Member 
States  introduced  also  in  the  national  legislations  changes  that  were  optional  for  Member 
States.    Finally  some  other  changes  were  introduced  by  the  Member  States  as  additional 
simplifications, while not really foreseen by the Directive, but not contradicting it.   

It  is  worth  mentioning  that  for  the  invoice  issuance  and  content,  the  national  legislation  of 
some  Member  States  was  already  in  line  with  the  SID.  Consequently,  the  extent  of  the 
changes depends on how previous national legislation was framed. Thus the Directive had an 
uneven impact on the different national legal frameworks. That is why for the purpose of the 
assessment these provisions were prioritised based on the extent of the legal change (i.e. the 
number of Member States in which they caused a change to the national legal framework) and 
the VAT practitioners’ perception of whether they  had  affected companies’ behaviour. This 
prioritisation  showed  that  the  changes  regarding  the  applicable  jurisdiction  (Article  219a  of 
the  VAT  Directive),  simplified  invoices  (Articles  220a,  226b,  238  of  the  VAT  Directive), 
timing to issue invoices ( Article 222 of the VAT Directive) and self-billing (article 224 of the 
VAT Directive) were considered as substantive, whilst the other changes brought by the SID 
were rather considered of minor impact6.  

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6  

 For more details on the transposition of the e-invoicing provisions see chapter 3.1.1. of the Commission 
Staff Working Document.  
See section 3.1.2. of the Staff Working Document.  

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2.3.  Other invoicing rules 

The  SID  introduced  one  specific  change  targeting  SMEs,  the  so-called  combined  cash 
accounting  for  certain  micro-enterprises.  The  analysis  of  the  transposition  of  the  cash 
accounting  provision  shows  no  discrepancies  between  EU  rules  and  national  legal 
frameworks.  Other  changes  relate  to  the  VAT  chargeability  rules  for  the  intra-Community 
supply  and acquisition of goods and their transposition  led to a harmonised approach in  the 
Member States on this aspect.    

3. Main impacts of the Second Invoicing Directive 

3.1.  The reduction of the administrative burden 

The reduction of administrative burdens on businesses by the SID were triggered mainly by 
the  following  two  sets  of  provisions:  (i)  e-invoicing  requirements  and  (ii)  the  issuance  and 
content of invoices, which simplified and harmonised the invoicing requirements.   

Regarding e-invoicing, the positive role of the SID is recognised. The SID was clearly one of 
the factors which stimulated the growth in the use of e-invoicing among EU businesses since 
2014.  Based  on  the  study,  the  biggest  impact  of  the  SID  on  the  reduction  of  administrative 
burden  is  due  to  the  higher  uptake  of  unstructured  e-invoicing7,  because  of  simplifications 
which  encouraged  companies  to  switch  from  paper  invoices  to  PDFs8.  The  SID  did  not 
distinguish  between  structured9  and  unstructured  e-invoices.  By  not  differentiating  between 
the two e-invoice formats and enforcing the technology-neutrality principle, the Directive did 
not directly stimulate the use of automatically processable invoices and thus it did not lead to 
an increase in the uptake of structured e-invoices.  
Quantitatively10,  the  Directive  is  estimated  to  have  reduced  administrative  burdens  on 
companies by EUR 1.04 billion over the 2014-2017 of which about EUR 920 million is to be 
attributed to the uptake of unstructured invoicing11. The micro companies12 benefited the most 
from this impact of the SID, given that they adopted the unstructured e-invoices as they were 
not equipped to deal with structured e-invoicing requirements. 

Regarding the revision of issuance and content of invoices, the burden reduction was assessed 
as  rather  limited.  The  provision  that  had  the  biggest  impact  on  administrative  burden 

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12  

Unstructured  e-invoices  refer  to  invoices  transmitted  electronically  without  a  prescribed  or  specific 
format, e.g. an email with a PDF attachment or a fax received in electronic not paper format.   
Portable Document Format, a file format for capturing and sending electronic documents in the intended 
format 
Structured  electronic  invoices  refer  to  invoices  issued,  transmitted  and  received  in  a  structured 
electronic format allowing their automatic and electronic processing.  
Regarding the calculations please see section 5.2 and section 6 of the Final Report on the Evaluation of 
Invoicing Rules of Directive 2006/112/EC.  
The rest of the savings comes from simplified invoicing and cash accounting scheme.  
According  to  Commission  Recommendation  concerning  the  definition  of  micro,  small  and  medium-
sized  enterprises  ((C(2003/1422),  a  microenterprise  is  defined  as  an  enterprise  which  employs  fewer 
than 10 persons and  whose annual turnover and/or annual  balance sheet total does not exceed EUR 2 
million.  

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reduction was the simplified invoicing regime (in quantitative terms assessed at about EUR 38 
million per year13).  

3.2.  The impact on the Internal Market 

The  SID  provided  a  positive  contribution  to  support  the  functioning  of  the  internal  market 
coming mainly from e-invoices and cross-border invoicing.  

Firstly, the data collected within the study demonstrates that, while in 2014 one in four intra-
EU  traders  issued  e-invoices,  this  number  increased  to  three  in  four  traders  in  2018.    This 
implies  that  the  SID  removed  the  problems  which  made  cross-border  e-invoicing  more 
difficult  and  thus  clearly  contributed  to  the  increased  usage  of  e-invoices  in  cross-border 
transactions.  

Secondly, the SID introduced four further significant changes to the rules applicable to cross-
border invoices: (i) the new rules on the applicable invoicing regimes (Article 219a); (ii) the 
uniform time limit for the issuance of invoices for intra-EU transactions (Article 222); (iii) the 
new  rules  on  currency  conversion  (Articles 91  and  230);  and  (iv)  the  simplified  content  of 
invoices  for  cross-border  transactions  subject  to  reverse  charge  (Article 226a).  Furthermore, 
the  new  rules  on  self-billing  (Article 224)  also  simplified  the  use  of  this  regime  for  cross-
border  transactions.  These  changes  increased  the  legal  certainty  of  the  invoicing  rules 
applicable to intra-EU transactions.   

The  impact  on  the  Internal  Market  of  the  other  SID  provisions  is  considered  more  limited 
since  they  did  not  affect  the  invoicing  processes  and  thus  passed  rather  unnoticed  by 
businesses.  

3.3.  The role of the Directive in the promotion of SMEs 

Most of the measures of the SID are of a general nature applying to both large enterprises and 
SMEs. However, simplifying and harmonising the regulatory framework leads to reducing the 
administrative burdens and thus the measures have the potential to be especially beneficial for 
SMEs,  which,  due  to  their  smaller  size,  usually  experience  more  difficulties  in  complying 
with tax obligations than large companies.  

The SID had a positive impact on SMEs due to the more widespread use of unstructured e-
invoicing. This positive impact was more significant on SMEs and micro companies than on 
large  companies.  The  SMEs  benefited  from  about  55%  of  the  burden  reduction  due  to  the 
more widespread use of unstructured e-invoicing. The difference in burden reduction, which 
is still significant, is attributed to large companies as large firms issue a visibly higher number 
of invoices.  

The SID also amended two invoicing regimes fully or partly targeted to SMEs, namely cash 
accounting  and  simplified  invoices,  and  thus  contributed  to  their  wider  use.  A  number  of 
Member States have introduced or enlarged the scope of the cash accounting regime after the 

13  

Regarding the calculations please see section 6.2.2. of the Final Report on the Evaluation of Invoicing 
Rules of Directive 2006/112/EC.  

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changes  introduced  by  the  SID.  It  has  been  estimated  that  about  60,000  additional  micro 
enterprises  benefitted  from  the  cash  accounting  scheme  thanks  to  the  SID.  All  in  all,  the 
uptake of the scheme remains still limited due to the fact that opting for the cash accounting 
scheme  requires  changes  to  the  accountancy  process  which  may  in  certain  cases  result  in 
higher advisors’ fees. The overall cost savings due to the higher uptake of the cash accounting 
scheme  generated  by  the  SID  have  been  estimated  at  EUR  33  million  for  the  ten  Member 
States  in  which  changes  can  be  attributed  to  the  SID.  The  importance  of  cash  accounting 
though  goes  far  beyond  the  mere  reduction  of  administrative  burdens.  It  played  a  very 
important role for micro-companies during the economic crisis when the economic conditions 
deteriorated and the payments became more difficult.  

Regarding  simplified  invoices,  due  to  the  changes  brought  by  SID,  the  regime  has  been 
introduced in a number of Member States while other Member States enlarged its scope.  The 
simplified  invoicing  regime  was  assessed  as  having  the  biggest  impact  on  administrative 
burden  reduction  from  all  the  provisions  on  issuance  and  content  of  invoices  (see  above 
section 3.1). Still, the use of simplified invoices remains largely limited to specific business 
sectors, such as accommodation, restaurants, retail trade, petrol stations and transport services 
and thus the burden reduction is not substantial. 

3.4.  Fight against VAT fraud 

As  a  whole,  the  Directive  was  also  intended  to  support  tax  control  activities,  eventually 
fostering an improvement in VAT compliance. In particular the SID amended two provisions 
to this end: i) the time limit for issuing invoices for intra EU transactions and ii) the rules on 
the VAT chargeability of intra-EU supplies and acquisitions. However, there is no evidence of 
any significant impact of the SID on tax control or VAT compliance. The opinions expressed 
by tax authorities confirm that the effects of the SID when it comes to VAT compliance are, if 
any, rather limited. Tax authorities and stakeholders are of the opinion that not more can be 
achieved  by  invoicing  rules  in  the  area  tax  control.  Since  the  information  from  invoicing  is 
not readily available to tax authorities, their focus is currently on systems assuring real-time 
reporting  allowing  better  risk  analysis  and  more  targeted  controls.  At  the  same  time,  it  is 
reassuring 
invoicing  and  e-invoicing 
requirements did not have any adverse impact on tax control activities.  

the  simplification  and  harmonisation  of 

that 

4. Main shortcomings of the Directive 

The assessment of the invoicing rules showed one shortcoming of the SID and some emerging 
issues which are outlined below.   

4.1.  The lack of clarity on the BCAT 

In the context of e-invoicing, the SID introduced the concept of Business Controls that create 
a  reliable  Audit  Trail  (BCAT)  as  a  mean  to  prove  the  e-invoice  Integrity  and  Authenticity 
(I&A).  This  concept  is  perceived  as  still  complex,  not  uniformly  interpreted  by  the  tax 

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authorities and poorly applied by economic operators across the EU. Stakeholders see this as a 
shortcoming of the SID.  

The SID (in Article 233) establishes the principle of the freedom of evidence for the economic 
operators  to  prove  Integrity  and  Authenticity  of  e-invoices.  However,  in  practice  the  only 
methods  used  include:  (i)  e-signature;  (ii)  the  Electronic  Data  Interchange;  and  (iii)  BCAT. 
Consequently,  BCAT  works  as  the  default  method  to  prove  the  e-invoice  I&A  for  all 
companies  which  did  not  opt  for  e-signatures  or  EDI.  This  implies  that  most,  if  not  all, 
companies  exchanging  e-invoices  as  unsigned  PDFs  should  have  a  BCAT  system  in  place. 
However, the compliance by companies and the enforcement by tax authorities were limited, 
and even absent in some Member States. Overall, stakeholders consider that there is lack of 
practical  definition  of  the  BCAT  in  the  Directive.  Some  guidance  was  included  in  the 
secondary legislation of the Member States as well as in Explanatory Notes prepared by the 
European Commission. Despite these efforts, economic operators do not regard the guidance 
provided on BCAT as adequate and sufficiently clear. This translates into doubts on how this 
option should be applied in practice and whether it will be accepted during tax audits.  

4.2.  The complexity of archiving rules 

A possible emerging aspect refers to archiving rules. The SID did not include provisions on 
archiving.  Since  the  transpositions  of  the  Directive,  the  complexity  and  regulatory 
fragmentation  of  the  archiving  rules  increased  unevenly.  This  is  due  to  the  fact  that  certain 
Member  States  adopted  very  detailed  rules  on  the  e-archiving  of  fiscal  documents,  which 
obviously also apply to e-invoices. Nearly 40% of stakeholders consider that national rules on 
archiving for e-invoices are burdensome and difficult to comply with.  

4.3.  4.3 National e-reporting requirements 

Another  issue  that  emerged  after  the  adoption  of  the  SID  but  not  resulting  from  it  is  the 
introduction  by  several  Member  States  of  requirements  to  submit  electronic  declarations  on 
certain  domestic  transactions.  The  Member  States  introduced  such  reporting  to  tackle 
fraudulent  activities.  Stakeholders  see  a  risk  of  dis-harmonisation  and 
increased 
administrative burdens by the proliferation of such national e-reporting requirements.  

5. Conclusions and possible way forward 

The  assessment  of  the  Directive  is  largely  positive,  as  having  effectively  supported  the 
simplification and harmonisation of invoicing and e-invoicing rules across the EU. The SID 
contributed  to  the  uptake  of  the  unstructured  e-invoicing,  the  reduction  of  administrative 
burdens on businesses, the increase of legal certainty for economic operators and the proper 
functioning of the internal market. The provisions of the SID remain relevant and appropriate 
for stakeholders’ needs namely clearer, simpler and more harmonised e-invoicing rules. 

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In  some  areas,  such  as  the  improvement  of  tax  control  activities  and  SMEs  promotion,  the 
achievements were positive but lower than their potential.  

The assessment also identified one shortcoming stemming from the SID, namely the lack of 
clarity  on  BCAT.  Moreover,  some  other  issues  not  derived  from  the  SID  but  imposed  at 
national  level,  have  emerged,  such  as  complex  archiving  rules  and  national  e-reporting 
requirements.  

Regarding the BCAT, there would be a need to provide more clarifications in order to tackle 
the above shortcoming. However, it is doubtful that such clarifications could be provided in 
the  legislative  text.  This  is  because  the  intent  of  the  BCAT  is  to  encompass  many  different 
types of business processes and any definition included in the Directive would limit its scope 
and would risk becoming obsolete due to  technological  advancements.  Furthermore, the tax 
authorities  seem  to  attach  less  importance  to  strict  Integrity  and  Authenticity  (I&A)  rules 
because  of  the  introduction  of  e-reporting  requirements.  Finally,  it  would  risk  imposing 
additional burden on business, especially on SMEs. Therefore, it could be explored whether 
the clarification of the BCAT could be better achieved by Commission’s Explanatory Notes 
and sharing of best practices in Member States. This could be accompanied by some further 
clarifications on the legal definition of e-invoices.  

On the archiving rules, an area which is considered to be complex by businesses, it would be 
difficult to intervene at EU level since the detailed requirements on the storage of invoices are 
laid down by Member States. With the development of digital solutions, the reflection in this 
area could focus for instance on whether developing a standard for a European cloud service 
for storage of invoices could be useful.   

As  regards  tax  control,  according  to  tax  authorities  and  stakeholders  current  invoicing  rules 
are  well aligned  with  the needs of tax control  activities and not  much  more can actually  be 
obtained from invoicing rules to further improve tax control. Thus any possible amendment of 
the  VAT  Directive  for  this  purpose  would  not  bring  much  added  value.  Instead,  many  tax 
authorities are currently looking at how to get access to transaction data without having to get 
physical or electronic access to invoices, thus introducing effective and real-time e-reporting 
requirements.  

The main focus of possible further improvements to promote SMEs would need to be on cash 
accounting.  However,  the  cash  accounting  scheme  is  overall  positively  assessed  by 
stakeholders and no emerging issues were signalled.  

In terms of the limited administrative burden reduction, this is mainly attributed to the lower 
uptake  of  the  structured  e-invoice.  This  was  the  policy  choice  made  in  the  SID.  A  more 
radical  approach  considering  only  structured  e-invoices  as  a  valid  document  would  require 
amendments to the existing legislation.  

In conclusion, the invoicing rules introduced by the SID are assessed as working well by tax 
authorities  and  stakeholders  and  no  major  issues  were  identified.  In  the  context  of  the  fight 
against  fraud  and  given  the  technological  developments  and  the  recent  trends  in  certain 
Member States on e-invoicing and e-reporting, the Commission together with Member States 
will  explore  whether  the  potential  of  e-invoicing  can  be  further  unveiled  at  EU  level.  The 
Commission  will  also  open  a  reflection  on  the  e-reporting  requirements  and  in  particular 

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regarding  the  impact  on  the  internal  market  caused  by  the  different  rules  applicable  in 
Member States.  

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