A GUIDE FOR CREATING Tax-COMPLIANT ELECTRONIC INVOICES. How Ariba Invoice and the Ariba Supplier Network can facilitate e-invoicing

Transcription

1 A GUIDE FOR CREATING Tax-COMPLIANT ELECTRONIC INVOICES How Ariba Invoice and the Ariba Supplier Network can facilitate e-invoicing

2 COMPLIANT ELECTRONIC INVOICES 1 INTRODUCTION Legislative Overview General Definitions 7 2 COMPLIANT ELECTRONIC INVOICES Country Review: Australia Country Review: Belgium (EU-Country) Country Review: Canada Country Review: France (EU-Country) Country Review: Finland (EU-Country) Country Review: Germany (EU-Country) Country Review: Great Britain (EU-Country) Country Review: Hong Kong Country Review: Hungary Country Review: Ireland (EU-Country) Country Review: Italy (EU-Country) Country Review: Netherlands (EU-Country) Country Review: New Zealand Country Review: Norway Country Review: Singapore Country Review: South Africa Country Review: Spain (EU-Country) Country Review: Switzerland Country Review: United States of America Countries that do NOT allow e-invoicing Copyright 2009 Ariba. All rights reserved.

3 COMPLIANT ELECTRONIC INVOICES Country Review: XXX ARIBA INVOICE PROCESS DESCRIPTION General commercial good security practices Start Creating Compliant Electronic Invoices Invoice Creation Process Digital Signing Process Invoice Content Management / Invoice rules Storage and Archiving Trading partner Off-boarding APPENDIX Storage of esignature and verification Protocol in cxml Invoice Visio Legend cxml Invoice Fields Reference 150 Copyright 2009 Ariba. All rights reserved. 3/152

4 COMPLIANT ELECTRONIC INVOICES 1 Introduction The purpose of this document is to enable users of Ariba Supplier Network and Ariba Invoice to easily determine how electronic invoicing regulations impact Tax/VAT compliance operations, and to demonstrate and document the process flows and specific ways in which the Ariba Solution conforms to these regulations a paperless, dematerialized approach to the entire invoice process. This document summarizes information collected by Ariba. Disclaimer: This document is presented for informational purposes, and for the convenience of the reader. The document seeks to distil for the reader Ariba s current understanding of certain VAT and tax rules for a country. The document is not deemed a thorough analysis of tax and other legal issues related to the creation, transmission, and storage of electronic Tax/VAT invoices. Consultation with the reader s particular tax and legal advisor is recommended for an analysis of the requirements affecting the reader. Note that this document does not create a warranty, does not constitute legal advice, nor is it part of the Ariba Invoice product s user documentation (whether user guides, manuals, or otherwise). Also Ariba does not play a tax advisor role and therefore cannot for example provide complete lists of Tax rates and tax categories Why do companies care about einvoicing? Moving from paper-based invoice flows to electronic channels is an efficient way to cut costs and enhance supply chain integration. However, for e-invoices to be recognized on an equivalent audit basis as paper invoices for value-added-tax (VAT) or similar indirect taxes such as GST or Sales Taxes purposes, most countries require e-invoices to be appropriately secured. Many countries have quite specific security requirements. Not meeting such requirements can lead to sanctions including fines and the possibility of buyers having to repay already deducted VAT. Why the VAT complexity does exist? In terms of revenue, VAT is one of the most important forms of taxation in VAT countries and as invoice regulations are implemented at country level with variations on country by country comparison a complex situation needs to be managed. Implementing a cost-effective tax compliant e-invoicing system requires a holistic approach that takes into account technical, process and legal aspects of a corporation s invoice processes throughout the relevant disciplines in the company. However, the approach must be driven by a tax perspective, which means first deciding on the desired outcome of an audit process and then designing the system from the resulting requirements. What s KPMG s role in the development of this document? KPMG advises Ariba on Ariba's interpretation of tax related invoice requirements and, where needed, suggests adaptations to the Ariba electronic invoicing solution to comply in countries around the world. In practice, KPMG analyzes e-invoicing legislation applicable for the specific country in regards to domestic trade and cross-border/intra-eu (if applicable). To this aim, KPMG helps Ariba provide to each of our end customers (buyers and suppliers) this Guide for creating VAT-compliant electronic invoices which summarizes the VAT legislation applicable in their country regarding electronic invoices and a summary of the technical process used by Ariba 4 Copyright 2009 Ariba. All rights reserved.

5 COMPLIANT ELECTRONIC INVOICES - to achieve these requirements. Depending on the tax complexity and acceptance of einvoicing in any given geography, KPMG may produce any of the following deliverables: Completion of ARIBA VAT Country Questionnaire - KPMG correspondents in each requested country completes a jointly defined TAX questionnaire. Drafting the customer facing document KPMG may draft a country specific section of the Guide for creating VAT-compliant electronic invoices which is a customer facing document. Sign-off the customer facing document - Upon Ariba request, a local VAT specialist of the KPMG VAT network signs-off a letter where they will indicate that they have personally reviewed the Country Review section of the Guide and provided the information requested in accordance with the VAT legislation of each country. Update - On a periodic bases or upon request, KPMG may update the advices received on electronic invoicing rules in each country and confirm whether the previous advices are still relevant. SIGN-OFF OF THE ARIBA S SOLUTION FROM A VAT PERSPECTIVE - Upon request, KPMG may examine whether the Ariba Solution is compliant with the country legislation of the requested country. In practice, the purpose of this work is to indicate to Ariba whether in this part there are Ariba Solutions features which should be changed to be adapted to the local legislation. CUSTOMER SPECIFIC QUERIES There may be situations where buyers or supplier need additional tax assistance beyond our current documentation or where tax rules rulings are particularly ambiguous. Where appropriate and needed, Ariba may schedule meetings between customer and KPMG. Ariba maintains a prioritized list of countries requiring KPMG tax review. This list is built in consultation with Sales and Network Account Managers who have knowledge of current supplier enablement priorities across our customer base. Naturally the countries with most customer requests are at the top of the list. Copyright 2009 Ariba. All rights reserved. 5/152

6 COMPLIANT ELECTRONIC INVOICES 1.1 Legislative Overview EU Countries: In 2001, EU Council Directive 2001/115/EC (amending Directive 77/388/EEC) on Invoicing was published, with the purpose of simplifying, modernising and harmonising the conditions for invoicing and electronic invoicing in respect of value added tax. By 1 January 2004, this directive had to be transposed into the national legislation of every EU Member State, with a date of 1 May 2004 being laid down for the ten newly-joined Member States. Although there has been some disharmony in the translation into local legislation, many companies and solution-providers are using paperless einvoicing already. Council Directive 2001/115/EC of 20 December 2001 is now integrated into Directive 2006/112/EC of 28 November 2006 on the Common System of Value Added Tax. Other Regions: Countries in many other regions of the world are now starting to allow e invoicing. Conditions often resemble those of the European Union, but country-specific requirements always apply. When a Trading Partner uses a Service Provider, this never implies outsourcing of any Trading Partner tax responsibilities or liabilities to the Service Provider. Outsourcing of taxrelevant e-invoicing processes to a Service Provider can therefore never be an excuse for a Trading Partner s non-compliance towards the tax authorities. The Service Provider s legal obligations are in most countries strictly contractual in nature; consequently, the obligations of Service Providers are merely derived from the Trading Partners responsibilities. This is also how the Guidelines treat Service Provider responsibilities. Tax authorities offer system audits to the taxable person. These audits typically address the end to end process Ariba supports these reviews by offering process documentation and advisory service. As the Ariba Solution is not addressing the complete process, e.g. tax reports are generated in the trading partners AP/ERP systems, this support can only cover the Ariba components. It should be noted, however, that this is different in countries that require a form of Service Provider approval or accreditation, as well as in countries where VAT law explicitly creates direct legal obligations for Service Providers: in such cases, a Service Provider may also be held directly accountable for the tax compliance of services delivered under or governed by such countries laws. 6 Copyright 2009 Ariba. All rights reserved.

7 COMPLIANT ELECTRONIC INVOICES General Definitions Electronic invoicing (einvoicing) is the sending, receipt and storage of invoices in electronic format without the use of paper-based invoices as tax originals. Scanning incoming paper invoices, or exchanging e-invoice messages in parallel to paper-based originals is not considered electronic invoicing. Ariba s view is that the easiest, most cost-effective and future-proof way to make an international e-invoicing process comply with local laws is to use electronic signatures (esignatures) where possible. The esignature option presents a number of key benefits over the EDI option: when applied correctly, electronic signatures can reduce the complexity of the e-invoicing systems and allow for easy audits of integrity and authenticity. Therefore the following country requirement summary is not targeted to cover EDI type processing of invoices. Depending on country specific legislation not all countries have defined esignatures requirements. If esigning for a specific country is supported by the Ariba e-invoice solution it is specified in the Ariba esigning Country Matrix, reference Trading Types: Domestic Trade invoice sender and receiver are in the same country Intra-EU Trade invoice sender and receiver are in different countries, but both are part of the European Union (EU) Cross-Boarder invoice sender and receiver are in different countries and at least one of them is not part of the European Union (EU) Data field support Ariba has endeavoured to provide that all data fields mandated for paperless communications are integrated in the Ariba invoice solution. In making these determinations, requirements for data fields in invoices have been reviewed from various legal perspectives mainly VAT and disclosure requirements as regards general company information. Should new data field requirements be forthcoming in the future, Ariba may integrate them into the solution. Term definitions The following terms have the following meaning in this document: Electronic invoice (e-invoice) or original e-invoice: A dataset in the agreed format, issued by or on behalf of a Supplier, which contains all details agreed between the Trading Partners and all the properties that the competent tax administration may wish to audit. Electronic credit Memo (e-credit Note): same concept as an e-invoice but referring to a credit (some countries use the term Credit Note instead of Credit Memo) e-invoice data: A dataset not yet or no longer representing an e-invoice, but which is intended to become an e-invoice or which has been derived from an e-invoice. Supplier: the Trading Partner that supplies goods or services to the Buyer and that may be obligated to issue and store an invoice, as well as to report; account for and pay the applicable output tax VAT. Buyer: the Trading Partner to whom the Supplier makes a supply and that may be obligated to receive and store an invoice, as well as being required to report and declare; and being entitled to deduct/reclaim applicable input tax VAT. Copyright 2009 Ariba. All rights reserved. 7/152

8 COMPLIANT ELECTRONIC INVOICES Customer: Used on invoices and refers context related to the Buyer to whom the Supplier makes a supply Trading Partner: Supplier or Buyer Agreed format of an e-invoice: The electronic data format that the Trading Partners have agreed to treat as the data format of the original e-invoice for taxation purposes. Audit of an e-invoice: The process of inspection of an e-invoice and/or the processes and systems used for processing or storing an e-invoice during its life cycle by a competent tax administration to ascertain the compliance of that e-invoice and the underlying sales transaction with applicable law. Auditability of an e-invoice: The ability for an e-invoice to be audited. e-invoice life cycle: A process comprising (1) the issue of the e-invoice by, or in name and on behalf of the Supplier; (2) receipt of the invoice by or on behalf of the Buyer; and (3) storage of the e-invoice during the storage period by or on behalf the Supplier and the Buyer. Electronic invoicing: The management of an e-invoice life cycle without the use of paper-based invoices as tax originals. Issuing an invoice in name and on behalf of the Supplier: The process whereby a party 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 competent tax administration. The issuing third party may be a Service Provider or, in the case of Self-Billing, the Buyer. Readability of an e-invoice: The ability for a competent tax administration to interpret the content of an e-invoice. Storage period of an e-invoice: The amount of time that applicable law requires the e-invoice to be stored and available for audit. einvoicing Service Provider or Service Provider: a company that, on the basis of an agreement, performs certain e-invoicing processes on behalf of a Trading Partner, or that is active in the provision of support services necessary to realize such processes. To determine whether an IT vendor is an Service Provider, the following circumstances should be taken into account: - That the contract with the Trading Partner(s) leads the latter to expect a VAT-compliant service. - The nature of the service is such that VAT compliance is appropriate. - The provider is insured against service related risks to his clients tax compliance. - An e-invoicing Service Provider can subcontract all of parts of its services to other providers; such subcontractors can also be e-invoicing Service Providers if they meet the criteria set out in this definition. - The dispatching and receiver can also be outsourced to one or multiples Service Providers for einvoice processing Audit trail: information or data (whether in the form of logic, e.g. an algorithm or computer code, or a process recording e.g. an event log, a video etc) that allows an auditor to verify that a process was performed in accordance with pre-defined expectations. Internal control: a process, effected by an organization's people and information technology (IT) systems, designed to help the organization accomplish specific goals or objectives. 8 Copyright 2009 Ariba. All rights reserved.

9 COMPLIANT ELECTRONIC INVOICES - Self-Billing: a method of invoicing whereby the Buyer issues the invoice in name and on behalf of the Supplier. Self-Billing may be facilitated by a Service Provider. Hybrid Self-Billing: An invoicing process whereby only part of supplies of a Supplier to one and the same Buyer are administered under Self-Billing procedures, while another part is invoiced directly by the Supplier. Electronic signature or e-signature, or digital signature, also Advanced Electronic Signature AdES: a unique representation of a dataset, such as an invoice, which has been encrypted using public key cryptography in order to make the authenticity and integrity of these data independently verifiable. Certificate Authority (CA): the entity which issues digital certificates also called trust centre, depending in the country requirement the CA needs to be accredited. The invoice issuer obtains the digital certificates (either stored on a smart card or provided as a software key) from the CA and uses it to esign the invoice data Digital certificate: a set of structured data that has been electronically signed by a certification authority to bind the identity of a legal or natural person to a public key that can be used e.g. to verify electronic signatures created by that person. Secure Signature Creation Device (SSCD): For smart card based digital certificates the card holder installs the smart card into a Secure Signature Creation Device (SSCD) and enters the Pin-code Issue of an e-invoice: this is a legal term that is defined differently in different jurisdictions. The e-invoice starts its life cycle as a formal document for VAT/Tax purposes when it has been issued. See for more explanation of the importance of the moment of issue in an e-invoicing process. Issuer of an e-invoice: the party issuing the e-invoice (the Supplier or a party a Service Provider (=esigning Service Provider) or, in the case of Self-Billing, the Buyer issuing the e-invoice in its name and on its behalf). Verification of an e-invoice: validation of integrity and authenticity of the invoice original (integrity via hash validation, authenticity via CRL or OCSP and signature authorization validation, e.g. check against authorized (agreed upon) certificate list) Archiving, Storage, Record or Document Retention: the keeping of invoices and related audit trails and materials under the conditions and for the period required by a competent VAT administration Master data: In this context for Trading Partners, Master Data are data that are stable over longer periods of time such as the names, addresses, and identifications, e.g. VAT numbers, DUNS number. Source Transaction Data: dynamic or transaction-specific business documents and information that are typically required to create a (compliant) invoice. This may included a contract, an order, dispatch information, delivery information, customer and product files, and possibly other details. 3-Corner model: an invoicing process set-up whereby Trading Partners have separate contractual relationships with the same Service Provider. 4-Corner model or multi-corner model: an invoicing process set-up whereby each Trading Partner has contracted with one or several separate Service Providers, whereby the Service Providers ensure the correct interchange of invoices between the Trading Partners. The concept of the 4-Corner model originated in the banking sector. Invoice header-level data: Data that relates to the whole invoice, e.g. invoice date, invoice number, Supplier and Buyer identification, name and address, bank account Copyright 2009 Ariba. All rights reserved. 9/152

10 COMPLIANT ELECTRONIC INVOICES details etc. Some data is sometimes made available at header level in an invoice because it may be valid for all detail lines, but may be over ridden as necessary by making the data available at detail line level, e.g. discount, currency code, VAT rate, delivery address, tax point, etc.. Invoice line-level 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 over ruled at line level VAT or Value-Added Tax: a consumption tax that is levied at each stage of production based on the value added to a product or service at that stage. Electronic data interchange (EDI) is the transfer of commercial, administrative and business information between computer systems, using data formats which have been mutually agreed by the parties. EDI exchanges of invoices are normally used between trading partners to automate their supply chain. 10 Copyright 2009 Ariba. All rights reserved.

11 COMPLIANT ELECTRONIC INVOICES - 2 Compliant Electronic Invoices The following chapters provide answers to frequently asked questions in regards to einvoicing on a country by country level. The information has been collected by Ariba in reaching out to invoice- and tax experts and other documentation. Users will be able to easily determine how electronic invoicing regulations on a country level impact VAT complained operations, and to demonstrate and document the process flows and specific ways in which the Ariba Solution conforms to these regulations a paperless, dematerialized approach to the entire VAT invoice process. For selected countries the document s completeness and accuracy in meeting these objectives is supported by a legal opinion (the complete legal opinion is available upon request) from a recognized authority on electronic invoicing and VAT compliance (Stefan Engel-Flechsig, Legal Counsel and Chairman of CEN/ISSS workshop on Electronic Invoices, see Legal opinions are available for: Belgium( 2.2), France( 2.4), Germany( 2.5), Great Britain( 2.7), Ireland( 2.10), Italy( 2.11), Netherlands( 2.12), Norway( 2.14), Spain( 2.17), Switzerland( 2.18) Ongoing compliance including reaction to future changes in legislation or other requirements is planed by Ariba. All parties shall inform each other as soon as circumstances come to their attention that may affect tax/vat compliance. Should new requirements be forthcoming in the future, Ariba may integrate them into the solution. Buyer Contract clause: 5.4 Each Party shall, at its own cost and expense, obtain all necessary regulatory approvals applicable to its business, obtain any necessary permits for its business and comply in all material respects with all laws and regulatory requirements applicable to the performance of its obligations under this Agreement. The Ariba Supplier Network Terms of Use state Ariba makes no representation as to whether the service satisfies the applicable legal requirements regarding VAT, and hereby advises You to consult with Your tax adviser on such issues. The requirements are structures into key areas of einvoicing: 1. General e-invoice and ecredit Memo Requirements 2. esigning and esignature validation 3. Storage and Archiving 4. Service Provider Requirements for e-invoice processing 5. Self-Billing 6. e-invoice Content Requirements 7. e-credit Memo Content Requirements Copyright 2009 Ariba. All rights reserved. 11/152

12 COMPLIANT ELECTRONIC INVOICES 2.1 Country Review: Australia General e-invoice and ecredit Note/Memo Requirements From Tax Compliance e-invoicing by Trust Weaver, reference , chapter Australia and New Zealand: Requirements for e-invoicing in Australia and New Zealand lean more on existing e commerce law than is the case in Europe and Latin America. The e-commerce law of New Zealand contains an assumption of reliability for what would be called advanced electronic signatures in the EU. This means that the evidentiary e-position of a taxable person would significantly improve using e-signatures. In terms of formal tax compliance, both countries focus on secure storage rather than transmission and receipt of the e-invoice. ( Australia actually sponsors a small business record keeping solution called e-record). Both countries, in practice, require good up-todate documentation of the e-invoicing system, and, in particular, of the archival system. Neither country has VAT. E-invoicing requirements stem mainly from Goods and Services Tax rules. In Australia, the normal mandatory storage period of tax invoices is 5 years. From PWC Global (E-)Invoicing & (E-)Archiving, reference , Country Chapter Australia: 3.2 Can a third party (not involved in the transaction) issue the invoice (outsourcing)? A. Do the tax authorities allow outsourcing? Outsourcing is allowed in Australia. B. Condition for outsourcing There are not specific conditions in Australia in respect to outsourcing. If the outsourcing provider is not an agent for the supplier, the provider must be authorized by the supplier to issue tax invoice on its behalf. The tax invoice must contain all the information relevant to the supplier (not the outsourcer). 4.3 Can I issue electronic invoices? C. Do the tax authorities allow electronic invoicing? Electronic invoicing is allowed in Australia. D. Does the customer have to agree? The customer does not need to agree to receive electronic invoices. E. How should I guarantee authenticity of origin and integrity of content? Authenticity of origin and integrity of content need not be guaranteed by any specific means. F. Must I notify the authorities before starting to issue electronic invoices? No G. Are there any other conditions for issuing electronic invoices? No Ariba supports these requirements by offering a trading partner framework as explained in 3.2 Start Creating Compliant Electronic Invoices. 12 Copyright 2009 Ariba. All rights reserved.

13 COMPLIANT ELECTRONIC INVOICES Country Review: Belgium (EU-Country) General e-invoice and ecredit Note Requirements General requirements of Council Directive 2001/115/EC, incorporated in Directive 2006/112/EC which allows e-invoices to be used in VAT calculations, reports, and archives for tax audits were addressed in Belgium by the Value Added Tax Code (hereafter: VAT Code ). Specific invoicing regulations were implemented in the VAT Code in 2004 by the Law Amendment and by the Royal Decree No 1/1992. Administrative guidance pertaining to the practice of electronic invoicing is contained in chapters XII and XV of the VAT Manual (2007). Details are also available at and There is no general certification procedure for electronic invoicing solutions in Belgium. With the Ariba Supplier Network, e-invoicing is a buyer-driven process that begins when the buyer activates their Ariba Supplier Network account to accept e-invoices as described in section 3.2. Invoices will not be forwarded to the buyer unless they fulfill the specific criteria set forth by default and/or buyer-configured rules. The table in section details the content specifications for e-invoices that are required for VAT compliance in Belgium, as well as the matching Ariba fields and rules. In addition to meeting domestic trade VAT regulations, the Ariba solution also enables e- Invoices to be used in non-domestic trade scenarios as all required fields are available as described in section Ariba supports the requirements for e-invoice and ecredit Notes by offering a comprehensive framework as explained under section 3 Ariba Invoice Process Description Signing and Signature validation What are the regulations concerning the use of electronic signatures to guarantee integrity and authenticity of the invoice? All companies relying on e-invoices in Belgium are required to guarantee the authenticity and integrity of e-invoices. As specified in article 1, 3 of Royal Decree No. 1/1992, these conditions can be achieved by an advanced electronic signature. The electronic signature should be mandatorily linked to a certificate issued by a third-party certification-service-provider to the sender of the invoice. This certificate qualifies as a electronic attestation which links signature verification data to a person and confirms the identity of that person. Furthermore, the Royal Decree specifies the signature should be uniquely linked to a signatory who is identifiable, that signing is under the sole control of this signatory, and that any changes of signed data can be identified. Although today little regulation exists for the verification of electronic signatures, the signature itself must be based on asymmetric cryptographic techniques. Nevertheless, companies may want to utilize the verification procedures, including time and date stamping, offered by the Ariba solution. Ariba supports these requirements by offering a country specific esigning framework as explained under 3.4 Digital Signing Process also covering cross-border requirements as explained under Invoice FROM and TO determination for certificate selection. Copyright 2009 Ariba. All rights reserved. 13/152

14 COMPLIANT ELECTRONIC INVOICES Storage and Archiving Following article 60 of the Belgian VAT Code, both suppliers and buyers are required to archive one copy of each invoice issued or received (original copy for incoming invoices). The modalities of storage of invoices and other fiscally relevant documents are discussed in that same article. Archiving details with respect to keeping books are discussed in Articles 14- of Royal Decree No. 1/1992. As regards the storage of books, all companies must maintain detailed and constantly updated registers of incoming invoices (entry journals) which specifically date, document, and identify supplies and services received from domestic, EU, and non-eu suppliers. Other commercially relevant documents must be similarly maintained. Registers of outgoing invoices (sales journals), which also document credit notes and corrective invoices should as well be archived. All invoices and fiscally relevant documents must be archived archived for 7 years as from the date they were issued. Books must be stored for 7 years as from January 1 of the year following that of the closing of the financial year. Electronically stored archives may be maintained outside of Belgium in any EU country provided the tax authorities have been notified upfront, and only if online acces within a reasonable timeframe from Belgium can be guaranteed. In addition to these requirements, Belgian VAT regulations specify that: e-invoices sent and received must be stored in their original formats along with the data which guarantee the authenticity of the origin and the integrity of the content of the invoices, i.e. electronic signatures and accompanying certificates; authenticity and integrity of e-invoices must be guaranteed throughout the entire archive period; when archived in Belgium, online access must be granted to e-invoice archives; when archived outside of Belgium, effective and complete online access to archives must be available to the tax authorities in Belgium; tax authorities can require translations of invoices archived in foreign languages; tax authorities can, for auditing purposes, require that electronically archived data be presented in a readable format. It is important to note that in case an invoice refers to another document and can not be considered as containing all mandatory invoice data without this document, this document is subject to the same technical archiving requirements as the invoice itself. Only in cases the archive requirements cause hardship for companies, the Belgian Ministry of Finance, or his delegate, can make modifications as appropriate. As regards the storage of invoices and documents issued in paper and stored electronically, strict conditions are detailed by the VAT authorities in Administrative Circular No 16 dd. May 13, The Ariba e-invoicing solution enables all original e-invoices including the electronic signature to be downloaded so they can be archived locally as required. Ariba supports these requirements by offering download and display features as explained under 3.6 Storage and Archiving. 14 Copyright 2009 Ariba. All rights reserved.

15 COMPLIANT ELECTRONIC INVOICES Service Provider Requirements for e-invoice processing Can a third party (not involved in the transaction) issue the e-invoice (= outsourcing)? Belgium allows companies to rely on third-party entities for electronic invoicing services if all pertinent regulatory conditions are met. In this respect, as recipient of the invoice, the buyer should be notified beforehand by the seller or the service provider of the invoicing mandate. Furthermore, an agreement between sellers, buyer and/or service provider is required that describes all services to be provided, including those pertaining to electronic signing. Indeed, the service provider should electronically sign e-invoices with its own electronic signatures, providing that all requirements pertaining to authenticity, integrity, and archival of invoices and signatures are met (see section 3.2). Also the responsibilities and liabilities of each party should also be addressed. The Ariba Supplier Network Terms of Use help to satisfy this requirement. A single service provider can concurrently deliver electronic invoicing services to all participants in a trading relationship (suppliers and buyers). When services are delivered to both sellers and buyers in a single trading relationship, service providers are advised to maintain the privacy of each party with regards to data, transactions, and processes. In addition to keeping separate invoice records for buyer and seller, each invoice should be electronically signed by the service provider and be marked with a timestamp, see 3.1 General commercial good security practices. It should be noted that, up till now, a third party cannot act at the same time as the certification-service-provider for e-invoices signed by himself with an electronic signature. Ariba supports these requirements by offering a trading partner framework as explained under 3.2 Start Creating Compliant Electronic Invoices Self-Billing Self-billing is allowed in Belgium. A written agreement with the supplier that endorses this practice is required, and the agreement must be made available to tax authorities upon request. In the event of self-billing, buyers are required to draft and transmit invoices to the supplier. As a consequence, it is then the buyer who should electronically sign e-invoices with its own electronic signature. Each invoice must be explicitly or implicitly accepted by the supplier. More information on self-billing in Belgium can be found in the Circular Letter AOIF No. 48/2005 of 8 th December Information included covers: basic conditions; applicable EU laws; details of self-billing agreements; procedures for acceptance of invoices; outsourcing of self-billing; accountability of self-billing e-invoice Content Requirements The specific requirements for e-invoices in Belgium, and the matching Ariba field names and invoice rules, are displayed in the table below. The following mandates must be met: invoices must be issued no later than the fifth working day of the month following the date of supply; Copyright 2009 Ariba. All rights reserved. 15/152

16 COMPLIANT ELECTRONIC INVOICES invoices can be written in any language but for audit purposes, tax officials can require a translation into French or Dutch, depending on the region; invoices must contain the VAT number of the supplier and, if applicable, the VAT number of the customer; when multiple invoices are transmitted electronically in a batch to a single buyer, common data can be presented once; every document that modifies an original invoice is considered to be an invoice itself, and must be issued by the same taxable entity; if a VAT representative is appointed in the hands of the supplier/customer, debtor of the VAT, the relevant data of this representative should be mentioned. Amounts on e-invoices in Belgium can be in any currency, except for the VAT amount which has to be in the currency of the country where the supply takes place. Only in very specific case, these requirements, and the content specifications included in the table below, can be adjusted by the Ministry of Finance when the amount of the invoice is insignificantly low, or when administrative practices or technical conditions associated with issuing invoices make compliance overly burdensome. For related Ariba Invoice Rules see 3.5 Invoice Content Management / Invoice rules and reference Invoice Field with related Network Rules Country Matrix. Header-Level Country Requirement Sequential number of the invoice 1 Date of issue of the invoice 2 Full name and address of the supplier VAT identification number under which the supplier supplies goods or services 3 Full name and address of the customer VAT identification number of his customer 4 Ariba Field Name Invoice Number Invoice Date From (Contact role="from") Supplier VAT Number Sold To Customer VAT Number Total invoice amount without VAT VAT amount by VAT rate Total VAT amount Subtotal Tax Summary with tax detail beakdown Total Tax Conditional Required Fields (Supplier-driven) 1 Chronological and sequential number of the invoice, it can be based on one or several series of numbers; they must identify the invoices uniquely, must be identifiable with the number in the incoming (purchase) and outgoing (sales) journal 2 Back dating of invoices is not permitted 3 VAT identification number under which the supplier supplies goods or services. In Belgium, the VAT number consists of the company numbers (max. 10 figures plus BE 4 VAT identification number of this customer, e.g. number under which the goods were supplied or the services rendered to the customer. Needs to be in all invoices (i.e. not just the intra-community invoices) 16 Copyright 2009 Ariba. All rights reserved.

17 COMPLIANT ELECTRONIC INVOICES - VAT representative ID, name and address 1 VAT ID of Triangular Partner Commercial Fields Supplier s commercial register number (Supplier-driven optional) Supplier s Legal status (amount of share capital of the supplier = not applicable) (Supplier-driven optional) Total invoice amount Tax Representative complete Address Object Subsequent Customer info (Name and VAT ID) Supplier Commercial Identifier Supplier Commercial Credentials Amount Due Line-Level Country Requirement Name (description) of the goods supplied or the services rendered Quantity and nature of the goods supplied 2 Unit price exclusive of tax 3 VAT rate applied Taxable amount per rate or exemption 4 VAT amount payable 5 Date on which the supply of goods or of services was made or completed Tax Description 6 Discounts or rebates if they are not included in the unit price 7 Ariba Field Name Item Description Quantity + Unit Unit Price Subtotal Line-Tax Category Line-Tax Rate Line-Tax Taxable Amount Line-Tax Tax Amount Date Of Supply (VAT Only) Line-Tax Description Discount Amount 1 Where the person liable to pay the tax is represented by a VAT representative, the VAT identification number of that tax representative, together with his full name and address. 2 Quantity and nature of the goods supplied or the extent and nature of the services rendered; codes for describing the goods can be used 3 In any currency 4 In any currency 5 In the currency of the country where the supply is taking place 6 Where an exemption is involved, reference to the appropriate provision of the Belgian VAT Code (e.g. VAT due by the cocontractant- article 51, 2 of the Belgian VAT Code ) or reference to the appropriate provision of Council Directive 2006/112/EC, or to any indication that the supply is exempt or subject to the reverse charge procedure 7 In any currency Copyright 2009 Ariba. All rights reserved. 17/152

18 COMPLIANT ELECTRONIC INVOICES Ariba supports these requirements by offering a comprehensive invoice format as explained under 3.5 Invoice Content Management / Invoice rules e-credit Note Content Requirements What are the requirements for documents correcting or amending an initial invoice or offering discounts? Besides the legal requirement to reference an original invoice when issuing a credit note or any other corrective document and to include a header statement of "VAT to be reimbursed to the Belgian State to the extent it was initially recovered", this specific requirement is support by Standard phrases can be predefined for Online Create Invoice. Detailed regulations pertaining to credit notes have not yet been published by the Ministry of Finance in Belgium. Ariba supports these requirements by offering a comprehensive credit note format as explained under 3.5 Invoice Content Management / Invoice rules. 18 Copyright 2009 Ariba. All rights reserved.

19 COMPLIANT ELECTRONIC INVOICES Country Review: Canada General e-invoice and ecredit Note/Memo Requirements From Tax Compliance e-invoicing by Trust Weaver, reference , chapter Canada: The Canada Revenue Agency (CRA) has issued a series of circulars on electronic transactions and records for income tax purposes. These rules also apply to e invoices. The relevant processes prior to storage must ensure adequate controls to safeguard the accuracy, security and integrity of the data processed and kept in the system. These include access controls, input and output controls, processing controls and controls to log specific details of changes to records. Outsourcing of invoice issuance is permitted. An explicit agreement between the supplier and the third party issuer is strongly recommended. Documentation must be available that describes the relevant operating and business systems, including how transactions are processed and records kept and managed. Audit trails must be available during the storage period including electronic signatures and results from other security measures for the end-to-end process. Such audit trails should include relevant references to front-end systems, inventories, receipts and payments. The mandatory storage period is 6 years from the end of tax year to which the records relate. Records should be kept in a manner that ensures accessibility, security, accuracy, integrity, authenticity and reliability. Conversion of electronically kept records is permitted as long as these objectives are met. Records should be based on non-proprietary, commonly used data interchange standards and readable with CRA audit software. Back-up records are to be maintained at all times. It is considered good practice to keep back-ups at a location other than the business location for security and precautionary purpose. When the back-ups are used as a method of record retention, specific procedures must be put in place to ensure compliance with CRA record retention rules. Foreign storage is permitted subject to prior CRA authorization and online access. Third party storage providers may be used if all CRA requirements are met. The taxable person remains fully responsible to the CRA. The record retention rules apply even when a paper copy of the records is kept. From PWC Global (E-)Invoicing & (E-)Archiving, reference , Country Chapter Canada: 3.2 Can a third party (not involved in the transaction) issue the invoice (outsourcing)? A. Do the tax authorities allow outsourcing? Outsourcing is allowed in Canada. B. Condition for outsourcing The invoice must be issued in the name and on behalf of the supplier. The outsourcer can be established outside Canada Can I issue electronic invoices? A. Do the tax authorities allow electronic invoicing? Electronic invoicing is allowed in Canada B. Does the customer have to agree? The customer needs to agree to receive electronic invoices. The agreement of the customer need not be given expressly as there are no specific requirements in this respect. However, if the tax Copyright 2009 Ariba. All rights reserved. 19/152

20 COMPLIANT ELECTRONIC INVOICES authorities so request, the parties must be able to prove, by any means, the existence of the prior agreement. C. How should I guarantee authenticity of origin and integrity of content? iii. By other electronic means Invoices can be issued by electronic means other than using electronic signatures or EDI. It is require that any electronic data be capable of relating back to the supporting source documents and be supported by a system capable of producing accessible and readable copies. D. Must I notify the authorities before starting to issue electronic invoices? No E. Are there any other conditions for issuing electronic invoices? No Ariba supports these requirements by offering a trading partner framework as explained in 3.2 Start Creating Compliant Electronic Invoices. 20 Copyright 2009 Ariba. All rights reserved.

21 COMPLIANT ELECTRONIC INVOICES Country Review: France (EU-Country) General e-invoice and ecredit Note/Memo Requirements Council Directive 2001/115/EC / Directive 2006/112/EC which allows e-invoices to be used in VAT calculations, reports, and archives for tax audits was implemented in France on December 30, 2002 by article 17 in the Loi de Finance rectificative n The full text of the law, which can be found at (at "Journal Officiel," enter J.O. n 304 du 31 décembre 2002 page texte n 2), is now part of the Code Général des Impôts which can be reviewed at the same Web site. Two decrees and one ministerial order stating measures for the enforcement of article 17 were issued in July 2003 and are also now part of the Code Général des Impôts (CGI). They can be found in appendices III and IV to article 17 (at n and ). In August 2003, the French Tax Administration Direction Générale des Impôts (DGI) issued an electronic invoicing instruction ( Bulletin Officiel des Impôts, No. 136, 7th August 2003) which defines the mandatory requirements for fiscal recognition of e-invoices, and thereby regulates all associated administrative details. Collectively, these regulations add provisions to VAT regulations beyond those contained in the original EU Directive. They can be found at or and are summarized below DGI Regulations Impacting Electronic Invoicing Compliance Article 17 of Loi de finance rectificative dated December 30, 2002; Decrees no and related to e-invoices; Articles 289-bis, 289-V and 96 F of Annex III of the FTC; Articles L 13, L 102 B and C of the FTPC related to invoice storage; Article 242 nonies A of Annex II of the FTC and Article L of the FCC; There is no general certification procedure for electronic invoicing solutions in France. With the Ariba Supplier Network, e-invoicing is a buyer-driven process that begins when the buyer activates their Ariba Supplier Network account to accept e-invoices as described in section 3.2. Invoices will not be forwarded to the buyer unless they fulfill the specific criteria set forth by default and/or buyer-configured rules. The table in section details the content specifications for e-invoices that are required for VAT compliance in France, as well as the matching Ariba fields and rules. In addition to meeting domestic trade VAT regulations, the Ariba solution also enables e- Invoices to be used in non-domestic trade scenarios as all required fields are available as described in section Ariba supports the requirements for e-invoice and ecredit Notes by offering a comprehensive framework as explained under section 3 Ariba Invoice Process Description Signing and Signature validation What are the regulations concerning the use of electronic signatures to guarantee integrity and authenticity of the invoice? All companies relying on 289-V based electronic invoicing in France are required to ensure the integrity and authenticity of invoice data through the use of electronic signatures. The requirements for electronic signatures on e-invoices are less restrictive than those for other business documents as defined in the French Electronic Signature Legislation (Décret no of 30 March 2001). For purposes of e-invoicing, an electronic signature can be issued by any natural person or any legal person (such as a company). An advanced Copyright 2009 Ariba. All rights reserved. 21/152

22 COMPLIANT ELECTRONIC INVOICES electronic signature is allowed and it must be created with technology that is under the exclusive control of the signatory. A qualified certificate is not required, but if one exists it will be accepted. Invoices, e-signatures, and certificates must be archived by the entity sending and receiving the invoice. Macros are not permitted in e-invoice files. The authenticity and integrity of the e-invoice protected with an electronic signature must be verifiable throughout the lifetime of the invoice. With the Ariba solution, a verification protocol is included in the e-invoice. Furthermore, the electronic signature attached to Ariba e- Invoices allows verification to occur at any time. Electronic signature certificates are required to include the following: identification of the owner of the public key; public key of the signer; period of validity of certificate; unique serial number; electronic signature of the certification service provider. The Ariba solution includes these requirements. There are several specifications for verifying an electronic signature and the Ariba solution fulfils these as well. As a result, users can rely on the solution to perform verification checks of certificates for, and on behalf of, invoice recipients even if Ariba or a third party (on behalf of Ariba) issued the certificate. It must be specified in the electronic invoicing mandate agreed to by the supplier, the buyer, and Ariba. Ariba supports these requirements by offering a country specific esigning framework as explained under 3.4 Digital Signing Process also covering cross-border requirements as explained under Invoice FROM and TO determination for certificate selection Storage and Archiving Invoices transmitted electronically to or from business entities in France must be stored, with their original content and in their original formats, either in France or in a country that has signed the Convention on Mutual Assistance in Tax Matters, an International Convention (No. 127) of the Council of Europe (see, for the list of countries that have signed the Convention). However, it is mandatory in these situations that the country involved has also agreed to provide the right to access, download and use online, appropriate fiscal data. If stored outside of France, e-invoices must be available immediately in France for tax audit purposes. In addition, taxable entities must notify the tax authorities, before beginning the archive activity, of the archive location outside of France. The written notification, submitted on paper or via electronic message, must indicate the name and address of the customer or third party in charge of the archiving, the period of such archiving, and other relevant logistical information. This information may also be included in a document attached to the company s French statement of income or profit. e-invoicing records must be archived for six years, beginning with the end of the calendar year in which the invoice was issued, and the electronic archive medium must be automatically updated by the electronic invoicing system. In addition, commercial rules apply which require archiving for 10 years. The electronic signature certificate proving the integrity of the invoice sent or received, together with other mandatory references including the signature itself, the summary list (to include invoice number, due amount, etc.), and the list of trading partners must also be stored. All items archived must be stored in the chronological order of sending or reception. 22 Copyright 2009 Ariba. All rights reserved.