Invoice requirements

INVOICE REQUIREMENTS FOR CROSS-BORDER TRANSACTIONS

For a long time it was unclear which invoice requirements applied to goods and services provided beyond the border. Do you have to have to abide by the requirements of the country in which the supplier is established or the country in which the service takes place or is deemed to take place?  

With regard to the law changes which came into effect on January 1, 2013, the Secretary of State has indicated that the rules which apply are those of the country in which the supply or service takes place. In principle, this means that a Dutch supplier who supplies goods or services to other member states would have to bring themselves up to speed with the rules which apply in the other 26 member states. That is of course an almost impossible task, which is why a special rule has been designed which should help in avoiding most problems. It comes into effect in 2013 through a three-stage process.

Supplies within NL
First it must be determined whether the supply takes place in the Netherlands or abroad. If it takes place in the Netherlands, then it is simple: the Dutch invoice requirements apply.

Supplies outside the EU
If the supply does not take place in the Netherlands, then it must be determined whether the supply is considered to take place within our outside of the European Union. If it takes place outside the EU, then it is again simple: the Dutch invoice requirements apply.

Supplies within the EU (outside NL)
The last category concerns the supply of goods and services which are taxable in another country within the EU. It concerns:
• Supply of goods from an inventory which is held in another country;
• Long distance selling which is above the particular threshold for the country concerned;
• Installation and assembly supplies;
• Services which by definition are taxed in the country of the buyer;
• Special services which are taxed in the country of the buyer.

With respect to these cases we must first determine whether there is self-billing involved; in other words, the client creates the invoices themselves. If this is the case, then the rules of their own country apply. The Dutch supplier receives the credit invoice created on the basis of the rules of the buyer’s country.

If there is not self-billing then we must determine whether the supplier is established, or whether they have some fixed establishment which is involved with the business in the particular country concerned. If this is the case, then the rules of the country concerned apply (they should also have a VAT number in that country). The Dutch supplier must create the invoice according to the rules of the country in which the goods are delivered or the service takes place.

If the supplier is not established in the buyer’s country and also has no fixed address in that country with respect to the goods or service being performed, then we must determine if a reverse charge mechanism applies in that country.
• If there is no reverse charge mechanism, then (the supplier must register in that country) the rules of that country apply;
• If there is a reverse charge mechanism, then the Dutch invoice requirements apply. The buyer declares the VAT in their country.  

Although with intra-community transactions the term “VAT reversed” is used, it must be remembered that the customer must declare the VAT, but that this is not really reversed VAT. The customer is liable for the BTW because of the intra-community transaction. That is (for the buyer) an independent taxable fact and it is therefore for the supplier not a transaction which is taxable in the country of the customer. The supplier must therefore treat it as a home country transaction (with 0% VAT) and can refer to the rules of his own country for this reason.

CONCLUSION
In most situations the Dutch rules will apply. The problems mainly arise when there is no reverse charge mechanism and the Dutch supplier must inform themselves of the rules of the country concerned. This includes the rules concerning registration and invoicing, but also tax rates and administrative requirements.

Invoice requirements
A business is required to issue an invoice in the following three cases:
• When supplying goods or services to other businesses or entities in the Netherlands;
• When goods are delivered for which the long distance selling arrangement applies or when there is delivery of a new means of transport;
• Advance payments by other businesses or legal persons who are not businesses, before the transactions are performed.

In principle the invoice must be issued before the 15th day following the month in which the trade takes place. For continuous services it must be invoiced at least once a year in December. The timing of the invoice is important in determining the period in which the tax is charged.

For supplies to individuals no invoice has to be issued in principle.
Note: If the buyer is an entrepreneur who is not entitled to deduct VAT the supplier must issue an invoice.

Businesses with exempt supplies only are not required to issue invoices. If a business provides both taxable and exempt supplies the invoice requirements only apply to the taxable supplies. If an exempt supplier supplies goods or services for which the exemption from Art. 11(1)(r) OB applies, then the invoice requirements apply to these supplies.

A number of (types of) businesses are always required to issue an invoice: wholesalers of food products, drinks, dental materials, technical dental workers and suppliers of dentistry components.

The invoices must be issued either by the business, the customer receiving the supplies (self-billing), or a third party (outsourcing/third-party billing). If someone other than the service provider/supplier issues the invoice, the business remains responsible for the invoice. If the customer issues the invoice themselves, the following conditions apply:
• Both parties have agreed in advance that the customer issues the invoice;
• When the supplier disagrees with the issued invoice the customer must be informed in a timely manner. In principle, the supplier must then issue an invoice themselves unless parties agree otherwise;
• The invoice fulfills all legal requirements.

Invoice contents
A correct invoice is not only important for the supplier but also for the client. The taxable client is only entitled to deduct the VAT charged if the invoice fulfills the legal requirements. Pursuant to Art. 35a OB there is only considered to be a legally correct invoice when the invoice contains the following information:
• Date of issue;
• Sequential number identifying the invoice;
• Name and address of the supplier and the customer;
• VAT identification number of the supplier;
• VAT identification number of the customer if the supply is delivered with the application of the 0% rate for intra-community supplies, or if the charging of VAT with respect to the performed services is transferred to the customer; 
• The quantity and nature of the supplied goods or services; date on which the goods were delivered or services were performed or the date on which the advance payment has been made;
• The fee (split by tax rate/exemption), the unit price excl. VAT, any discounts;
• The rate of VAT payable;
• The total amount of VAT in euros;
• If a 0% rate or exemption applies or the VAT is transferred to the customer, an indication hereof, e.g. if the levy of VAT is transferred to the customer ‘btw verlegd/VAT reverse charged’;
• For an intra-community delivery of goods, e.g. ‘intracommunitaire levering/Intra-community supply of goods’;
• For an exempt supply, e.g. ‘vrijgesteld van btw/VAT exempt supply’;
• For the application of the margin scheme, e.g. ‘margeregeling/margin scheme for second-hand goods’;
• If the tax is paid by a tax representative: their name, address and VAT identification number;
• The details that are needed in order to determine if a vehicle is new, for example a vehicle registration certificate.

From January 1, 2013 the following requirements also apply:
• If the client issues the invoice instead of the supplier, the invoice should state: ‘invoice issued by the customer’. 
• If applicable, the words ‘Special scheme travel agents’.
• If applicable, the words: ‘Special scheme – art objects’, ‘Special scheme – collector’s items or antiques’.
• For amounts up to €100 simplified invoicing requirements apply.

For the issuing of an incorrect invoice a fine of a maximum of €4,920 can be imposed.

The amounts on the invoices may be specified in any currency. There are no further rules for this. However the total amount of VAT must be stated in euros. Businesses that supply goods to clients who are not businesses themselves must indicate their prices inclusive of VAT.

For some services simplified invoice requirements apply. Think of petrol receipts, taxis, public transport.

For the deduction of VAT on invoices for which the simplified invoice requirements apply, the payments must be traceable to the business.

When is the VAT payable?
Because of the increasing incidence of intra-community supplies and the control thereof, it has become increasingly important to the EU that it is agreed when the supply is taxable and at which moment this must be reported. From January 1, 2013 there are new rules in this area.

Supplies to individuals
In the first place we must make a distinction between supplies for which the supplier is required to invoice and supplies for which this is not the case. The latter is – in short – the case for supplies to individuals, but there are exceptions which apply to individuals, these are:
• Long distance sales in excess of the threshold;
• Supply of new vehicles (in the sense of the VAT laws);
• Certain supplies by wholesalers..
In these cases invoices must also be issued to individuals.

For continuous supplies (such as magazine subscriptions and heating maintenance etc.) it is now so that the VAT must be invoiced at least once per year. This is the case if no advance invoices are sent (but in practice this is seldom). The VAT declared in the period that the “invoices” for the advances are sent (invoice system) or when the payments for the invoices are received (payments system).

Supplies to businesses
For supplies to businesses and for supplies to individuals for which the supplier is required to invoice, a number of rules apply which for the supply of goods are the same as those for the supply of services, but there are also rules where the treatment of goods and service providers differs.
The supplier should therefore consider first if they provide goods or services. Next is the question of when the service is performed. However if the buyer has paid earlier, then that date is the basis (a payment after the date of completion is irrelevant). Furthermore new rules apply in the case of continuous supply. Here a distinction must be made between “normal supplies” and intra-community supplies; for continuous intra-community supplies the tax is supposed to be declared at the end of each calendar month. 
So they must therefore be processed every month. The deadline for billing is also new, under the old scheme it was the 15th of the month following the month of the supply or service. This is now the 16th, so that people have one extra day to send an invoice in time.

The (new rules) are summarized as follows:

For deliveries:

• Is it an intra-community supply?
  • If yes, is it continuous?
    • If yes, every calendar month
    • If no, is there prepayment?
      • If yes. Date of prepayment
      • If no, is the invoice on time?
        • If yes, invoice date
        • If no, the 16th of the following month
  • If no, is the supply continuous?
    • If yes, at least 1 x calendar year
    • If no, is there prepayment?
      • If yes, date of prepayment
      • If no, is the invoice timely?
        • If yes, invoice date
        • If no, the 16th of the following month

For services:

• Is there a service provided to a customer within the EU (ics)?
  • If yes, is it continuous?
    • If yes, at least 1 x calendar year
    • If no, is there prepayment?
      • If yes, date of prepayment
      • If no, date of completion of service
  • If no (service customer NL or >EU), is the service continuous?
    • If yes, at least 1 x calendar year
    • If no, is there prepayment?
      • If yes, date of prepayment
      • If no, is the invoice on time?
        • If yes, invoice date
        • If no, the 16th of the following month

CONCLUSION
For most suppliers the changes won’t bring any earth shattering changes to the system. All going to plan, the services which happen within the EU are still processed in the period in which the service was completed. Where appropriate the system must be adjusted, especially with respect to continuous supplies.

ELECTRONIC INVOICING
In the Netherlands it was already allowed to invoice electronically and to save invoices electronically without too many rules and alignment with the tax authorities. With effect from January 1, 2013 it will become easier for all businesses within the European Union. Henceforth paper and electronic invoices will be treated equally. The aim is to reduce costs for businesses and to reduce hassle. 

There are, however some conditions which people must abide by, but otherwise everyone is free to adopt the method of choice. People must ensure that the authenticity, integrity and the legibility are guaranteed. The authenticity and integrity can be guaranteed through electronic data interchange (EDI) and an advanced electronic signature, but businesses may also use other technologies. Therefore everybody is free to decide what is best for them. The expectation is that invoices will mostly be send via email as pdf files.

Before a business switches to electronic invoicing it must first be coordinated with the customer. It is not required to obtain prior approval. If the customer processes and pays the electronic invoice without comment, he is deemed to have approved the method of billing.

The tax authorities will have the possibility to request access and download information. Foreign tax authorities will also receive that right for goods and services which are taxable in their respective countries. Businesses are required to submit the saved details to the tax authorities within a reasonable frame of time. What a reasonable frame of time is will be determined in consultation with the inspector. 

The system must be accessible throughout the storage period. Upon change of system it is therefore necessary to keep the old in some way. This includes not only the hardware itself, but also login codes etc.

CONCLUSION
The legal options are now there for businesses, we will see to what extent businesses will put them into practice.