It is not necessary to include in the Accounting Act a requirement that the buyer may request an e-invoice from the seller

The Ministry of Finance came up with a draft act amending the Accounting Act, which gives all buyers registered as e-invoice recipients in the commercial register the right to demand an e-invoice from another accounting entity when purchasing goods or services. The Chamber informed the Ministry that it did not support the change on invoices sent between companies.

Under the current Accounting Act, an entity subject to accounting must submit an e-invoice to a public sector organisation. The draft act modifies this principle so that in the future an accounting entity who has marked itself as the recipient of an e-invoice in the commercial register may demand that the seller submit an e-invoice. The change applies to both the public and private sectors. This means that when the change enters into force, a public sector organisation may also require an invoice in a different format than an e-invoice, but at the same time a private sector accounting entity also receives the right to require an e-invoice from another private sector accounting entity.

The Chamber informed the Ministry of Finance that it supported the amendment in that the public sector organisations would henceforth have the right to request an invoice in a format other than e-invoice from an accounting entity. At the same time, we oppose the proposed change as regards to the invoices sent between companies. 

The planned change does not serve its purpose 
According to the explanations provided by the Ministry of Finance, the main purpose of the amendment is to encourage the introduction of e-invoicing. According to the Chamber, the solution contained in the draft does not fulfil its objective. First, the change may reduce the use of e-invoices if the change results in the current requirement that an accounting entity submit an e-invoice to the public sector being left out of the Accounting Act. Upon entry into force of the amendment, the public sector would have the right but not the obligation to request an e-invoice from the seller. Not all public sector organisations may exercise this right in the future.

The amendment also does not fulfil its purpose because the Bill does not impose an obligation on the seller to submit an e-invoice if the buyer so requests. In addition, the draft does not include a sanction that follows if the seller does not submit an e-invoice at the request of the buyer. As regards inter-company invoices, this is a meaningless provision which does not help to increase the uptake of e-invoicing. 

The amendment also does not fulfil its purpose because the draft act does not impose an obligation on the seller to submit an e-invoice if the buyer so requests. In addition, the draft does not include a sanction to be imposed if the seller does not submit an e-invoice at the request of the buyer. As regards inter-company invoices, this is a meaningless provision which does not help to increase the use of e-invoicing. 

Increased confusion possible 
The planned change could lead to confusion for both the public and private sectors. For example, if a buyer requires an e-invoice from the seller based on a planned change, but the seller does not comply with that requirement, the question might arise whether the seller is required to submit an e-invoice and what happens if the seller refuses to submit an e-invoice or, for example, submits a PDF invoice instead of an e-invoice.

No change needed
According to the Chamber, the amendment concerning e-invoicing between companies is an overregulation. The state should not interfere with business-to-business relations with additional regulation unless there is an extremely good reason for doing so. There is no such good reason at the moment. In addition, it remains unclear which practical problem is to be addressed by means of the amendment. The need to regulate accounts between companies at this point in time is also decreased by the fact that negotiations are currently underway in the European Union on a proposal for a directive under which Member States may be obliged to impose an obligation on accounting entities to submit electronic invoices. 

The workload and costs of smaller companies may increase
The introduction of e-invoicing will have a greater positive impact on companies with more invoices that are also more likely to have more complexity and volume. For such companies, using e-invoicing will help reduce both workload and costs.

At the same time, there are many enterprises in Estonia where the volume of invoices is not large. We have received feedback from some of these companies that if they have to start sending more e-invoices in the future, this could increase their workload and/or costs.

One of the reasons for the increase in costs may be that the existing IT systems are incompatible or outdated and do not allow the introduction of e-invoicing. In such cases, additional investments in IT systems should be made for the introduction of e-invoicing. While the volume of invoices is small, these investments do not pay off and it is more cost-effective to continue with PDF invoices, for example. Besides IT investments, the second solution is to use e-invoice portals to send e-invoices, but in this case the invoice must be drawn up twice, i.e. both in the business software and in the e-invoice portal. This will again increase the workload of the company. There will also be an increase in workload and costs for companies that do not use accounting software.

As the amendment does not contribute to the desired objective, creates confusion, there is no need for a change and this leads to over-regulation, we have proposed to the Ministry of Finance to exclude business-to-business invoices from the draft, i.e. the amendment could only concern private and public sector invoicing. In the opinion of the Chamber, in order to facilitate the introduction of e-invoicing between companies, instead of amending the Accounting Act, raising awareness about the possibilities for using e-invoicing, its benefits and practical recommendations for the implementation of e-invoicing should be continued.

You can learn more about the planned changes to the Accounting Act here. According to the draft act, the planned changes will take effect on 1 January 2025.