E-invoicing and CTC models in Northern Europe

A certain trend can be seen in this region with a high penetration rate for e-invoicing in the B2B segment and the usage of Peppol to facilitate the transmission of mandatory B2G e-invoices.

Sweden – Early bird of e-invoicing in the public sector

Sweden was early out with its e-invoicing obligation in the public sector. Since 2008, issuing electronic invoices to governmental institutions has been mandatory. This was further extended in 2019 to encompass the entire public sector through the Peppol framework. 

From a B2B perspective, the country is purely a post-audit market. While e-invoicing is widely used in the private sector, it is not mandated. This, however, may change soon. 

The latest development in Sweden is that The Agency of Digital Government (DIGG), along with The Swedish Companies Registration Office (Bolagsverket) and the Tax Agency (Skatteverket), have submitted a formal request to the Swedish Government to investigate the introduction of mandatory e-invoicing in both the B2B and G2B segments. This request follows the latest developments in the EU with the ViDA proposal. There have also been rumors that Sweden is moving towards a Peppol CTC model for B2B e-invoicing as well.

There has yet to be final confirmation from the Swedish Tax Authority (Skatteverket) on settling for a specific CTC model, but Peppol CTC still seems to be a likely candidate. With B2B e-invoicing being expanded across the European Union (VAT in the Digital Age), Sweden is closely following these developments.

Norway – Sophisticated e-invoicing market

Norway also has been long ahead of other countries with regard to digitalizing their economy. Since 1 July 2012, all central government entities in Norway have been obliged to receive invoices electronically. This was executed using Peppol infrastructure using the EHF format, the Norwegian national version of Peppol BIS. 

The country has no mandate for B2B transactions today, but companies extensively use e-invoicing. 

Finland – The latest Peppol authority

Similar to its neighbours, Finland has gone a slightly different path for their e-invoicing. The country follows the post-audit model – the same as the other Nordic countries for B2B invoicing. However, for public invoicing, Finland has adopted an approach of interoperability and Peppol.

There are a few alternatives for sending e-invoices to the government. Suppliers can establish an interoperability agreement with the contracted Service Provider of the Finnish Government or send e-invoices through the Peppol network via a Peppol Service Provider. Worth mentioning in Finland is Tieke (the Finnish Information Society Development Centre), which, besides running an e-invoicing forum for Service Providers, also developed a search engine – the E-invoice address registry – that can be used for finding the e-invoicing addresses of companies.

The latest news in Finland is that it has joined the growing list of countries with their own Peppol authorities. Furthermore, it has formally announced its support for the ViDA initiative, the first Member State of the EU to do so.

Iceland - B2G e-invoices following the local standards without a mandatory infrastructure

In Iceland, government agencies only accept e-invoices complying with the national standard TS-236 technical specification. However, the Icelandic government neither mandates nor recommends any e-invoicing service provider or using a particular e-invoicing platform.

Suppliers can issue electronic invoices via their billing systems or service providers. Invoices sent to governmental entities are also accepted through the Peppol network.

There are currently no indications of Iceland introducing mandatory e-invoicing for business transactions, but things can change anytime.

Denmark – pioneering a new way to promote e-invoicing in the private sector

Another Nordic country that does not mandate B2B transactions is Denmark. The country uses Peppol/NemHandel for B2G e-invoicing.

The most significant development in Denmark recently has been the introduction of the new Danish Bookkeeping Act, effective as of 1 July 2022. The major change the act brings to the table is the requirement for businesses to use “digital bookkeeping systems” capable of issuing, receiving, exchanging, processing and archiving invoices electronically.

Software providers of the services above must also register with ERST (Erhvervsstyrelsen) to become classified as “digital bookkeeping systems”.

Although the bookkeeping act is active, the digital obligations will be gradually rolled out, with the expected starting date from 1 January 2024, with the larger companies that are obliged to submit an annual report to ERST being the first out and smaller companies later on. The timeline is subject to change since there have been delays in the implementation process. It is still quite unclear regarding the digital obligations and what additional requirements could be in store for businesses and service providers operating in Denmark. What’s clear is that the introduction of the new bookkeeping law reflects a new paradigm with regard to Danish e-invoicing.

A certain degree of affinity can be seen in the historically interrelated Baltic states when it comes to e-invoicing adoption.

All the countries in the Baltics are developing and rolling out e-invoicing initiatives within their respective borders.

Estonia - adopting a supplier mandate after incorporating EU Procurement Directive in the national laws

The Accounting Act Amendment Act 795 SE made Estonia another European country to go beyond Directive 2014/55/EU requirements and extend the B2G e-invoicing mandate to the suppliers’ side. 

As of July 2019, all invoices to the public sector can only be sent as e-invoices compatible with the European Norm. There is no specific mandatory infrastructure for e-invoicing in the country, i.e., contracting authorities and private businesses can contract an e-invoicing service provider.

Therefore, several private service providers offer e-invoicing exchange services in Estonia via interoperability or the Peppol network. For small companies (start-ups and SMEs) that want to send invoices to the public sector, the Estonian Center of Registers and Information Systems (RIK) made available, at no charge, the use of e-Financials, a web-based infrastructure to send invoices to governmental entities. On the B2B side, Estonia has not yet imposed specific requirements; thus, taxpayers can issue and exchange invoices and other documents in any preferred format or mechanism. 

Latvia setting sights on mandatory e-invoicing by 2025

Earlier in October last year, the Cabinet of Ministers in Latvia revised and approved the informative report initiated by the Ministry of Finance on implementing an e-invoicing system. The key novelty of this report is the introduction of mandatory e-invoicing in the B2B and B2G segments starting in 2025, and Peppol e-delivery network is proposed to be adopted as a single standard for sending and receiving e-invoices.

Lithuania – another Member State adopting Peppol to comply with the EU B2G requirements

The eSaskaita platform is the central information intermediary that receives and sends electronic invoices between suppliers and public contracting authorities in Lithuania. It is also Peppol-enabled since 2019: businesses can either connect directly with the platform to issue e-invoices or select an accredited Peppol Service Provider. The Service Provider will convert the data into the Peppol BIS 3.0 format, apply the necessary validations, and submit the e-invoice via the AS4 communication protocol to eSaskaita, which will provide the e-invoice to the buying public entity.

While the B2G sector in the country follows the centralized CTC model, Lithuania applies post-audit for business transactions.

The global trend shows a move from traditional VAT compliance towards real-time sharing of transaction-based data with tax administrations, often based on e-invoicing. This trend has been visible in the latest EU commission proposals - VAT in the digital age (ViDA initiative). Needless to say, ViDA is a significant initiative from the EU Commission that will impact businesses operating in the EU and beyond.

Looking at the landscape now, the fragmentation of EU tax compliance makes it highly challenging for companies to operate in multiple jurisdictions. Therefore, it will be crucial for businesses to invest in a solution that can handle global compliance and adapt to the ever-changing regulatory landscape. It will be interesting to follow how the continuous regulatory developments will force EU countries and businesses operating there to adopt more digitalized strategies.