The French E-Invoicing project: between opportunities and challenges

published on 8 May 2024 | reading time approx. 5 minutes

The French Finance Act for 2022 introduced an ambitious project for E-Invoicing and E-reporting in France, with progressive implementation scheduled to start on July 1, 2024. However, this implementation was recently postponed to 2026. The new timetable for the implementation of E-Invoicing provisions highlights the difficulties of implementing such legislation, both in terms of companies and their choice of intermediaries, and in terms of the interoperability of the French system with European provisions. Nevertheless, E-Invoicing remains a major step forward in terms of invoicing for companies, a step whose economic and compliance aspects seem to outweigh the latent disadvantages.

The French e-invoicing project: opportunities for businesses »
Challenges »
Conclusion »

The French e-invoicing project: opportunities for businesses

Opportunity of simplified invoicing

The introduction of the obligation to issue and to receive E-Invoices between VAT taxable persons established in France pursues several objectives that represent long-term opportunities for companies:

It strengthens the competitiveness of companies by improving their administrative efficiency, reducing payment times and creating productivity gains through dematerialization. Indeed, most studies show that dematerializing invoices represents a cost saving of between 50 and 75 percent compared to paper processing, and reduces processing time by around 30 percent;
Over time, it will simplify VAT reporting obligations for businesses by enabling the pre-filling of their French VAT returns;
It improves fraud detection, for the benefit of economic operators acting in good faith and thus avoid unfair competition from certain economic operators who previously did not correctly collect the Output VAT or wrongly reclaimed Input VAT, thus being able to apply anti-competitive prices.

Reinforcement of compliance

The French E-Invoicing obligation is linked to E-Reporting, the invoicing data being extracted from E-Invoices by the public platform or private dematerialization platform partners, depending on the company's platform choice.

Every invoiced transaction is therefore shared with the French tax authorities which obtain real-time information on transactions and operators. This real-time control implemented by the authorities has direct consequences on the behavior of the companies that will be more inclined to anticipate the risks and thus to maintain a high level of VAT compliance. The progressive implementation of the French project positively encourages companies and gives them an appropriate amount of time to take a detailed inventory and analysis of their VAT flows, limiting their VAT risks for the future. This underlines the positive aspect of such a control.

Challenges

System complexity and delayed implementation

The Finance Act for 2024 sets out a new timetable for the application of the provisions governing E-Invoicing, i.e.:

September 1, 2026 for large and mid-sized companies
September 1, 2027 for small and medium-sized businesses as well as for micro-businesses

The previous timetable called for these provisions to be applied from July 1, 2024 for large companies, 2025 for medium-sized companies and 2026 for all other companies.

This reform is accompanied with other less significant changes, such as the introduction of four new mandatory mentions, their introduction having also been postponed accordingly. The postponement of the implementation of the reform is justified by the desire to give companies more time to develop their digital systems under the right conditions. Indeed, following a survey carried out on behalf of the Direction Générale des Finances Publiques (French Tax administration), 57 percent of companies felt they could be set up by July 2024, which is why the reform has been postponed^[1]. The results of this survey can be explained by the complexity of the system, which combines several levels of obligations:

A first requirement is the determination of the place of establishment of the parties involved in the transaction;
A second requirement would be the determination of the applicable invoicing rules, the VAT territoriality of the transaction as well as the nature of the operation, which can be particularly complicated in case of complex operations involving both the provision of services and the supply of goods.

Indeed, those criteria have to be examined in order to determine under which obligation the transaction falls (E-Invoicing, E-Reporting of invoicing data and/or E-Reporting of payment data). This postponement also raises the question of whether the French project really is appropriate, given that the EU project is scheduled for implementation in 2028 and stipulates that E-Reporting will be mandatory for cross-border supplies of goods or services. Wouldn't it be wiser to wait for the completion of the European project to avoid overlapping and interoperability problems?

Interoperability of EU and French systems

Indeed, even if the French tax authorities ensure that the European and French standards will be in line with each other, the adoption of E-Invoicing does not necessarily go hand in hand with the adoption of the European E-Reporting standards. In the EU member states whose E-Invoicing systems already existed before the European standard was adopted, the use of the national standard generally predominates. Adopting a single standard across all Member states would streamline invoicing processes and procedures across Europe, while simplifying the invoicing process for public administrations.

Difficulties linked to private dematerialization partner platforms

In order to transmit their electronic invoices and transaction data, companies can choose between:

Either the public invoicing portal, to transmit electronic invoices to public authorities;
Or alternatively a private dematerialization partner platform – registered for three years by the French tax authorities.

Regarding private platforms, a list of candidates was recently published by French tax authorities, which must then give its approval for the registration of these various organizations. However, there is evidence of intensive canvassing of companies by various service providers, even though the technical guidelines issued by the tax authorities are still unclear, and no service provider has yet been registered.

It should be noted that a decree dated March 27, 2024 takes note of the new timetable resulting from the Finance Act for 2024, and provides a transitional regime for registration applications submitted before the public invoicing portal test environment is made available, enabling the registration of private dematerialization partner platforms.

Conclusion

All in all, this E-invoicing reform provides a more secured way to issue invoices for companies subject to the obligation, however it is still a work-in-progress as many questions still remain unanswered. In our opinion it is important for the French tax authorities, the European Union and businesses to continue working together to develop an E-Invoicing system that combines simplicity and efficiency and promotes VAT compliance. Other technical innovations such as the help of AI and the use of blockchain technology may one day be taken into account to improve or complete the current project and meet the objectives set.

[1] Survey conducted by the Ipsos institute on behalf of the French Tax Administration during summer 2023; quoted in the parliament’s amendment regarding the postponement of the reform on October 17th, 2023.