Companies scramble to digitalize transactions as new laws loom

By Anna Fedorova

One of the key areas where European governments are putting pressure on companies is taxation and invoicing, with the UK and Italy already taking steps to drive digitalization in this field.

In the UK, HM Revenue and Customs (HMRC) has embarked on the ‘making tax digital’ (MTD) campaign, which will mandate all businesses to use the government’s ‘MTD for business’ system from April 2019 to meet their VAT obligations.

There are a number of advantages to this initiative, which spans both business and individual taxation, according to HMRC.

Firstly, it will save customers time on providing the government with information it already has or can obtain from elsewhere, such as employers, banks, building societies and other government departments. Secondly, it can help prevent errors by allowing information relating to tax to be processed as close to real time as possible.

Thirdly, HMRC intends to make detailed financial information available through one digital account by 2020. Finally, new software will allow customers to interact with HMRC digitally at a convenient time.

Meanwhile, Italy is about to adopt a new law making e-invoicing obligatory for all business-to-business (B2B) and business-to-consumer (B2C) transactions from January 1, 2019.

This law will apply to all transactions performed between persons established or resident in Italy, foreign taxable persons permanently established in Italy, and Italian VAT registrations of non-established taxable persons.

E-invoicing in Italy has already been made mandatory for the public subcontract sector and supplies of petrol or diesel intended for use as motor fuel, and for tax-free shopping.

Italy is the first EU country to adopt this law, and expert say it may force other countries in the bloc to follow suit.

With these developments in mind, a number of companies are rolling out products and services to help businesses navigate the new regulatory landscape or prepare for future changes.

Recently, global invoicing company Tungsten Network expanded the scope of its invoicing services with the launch of Tungsten Network e-billing.

The new service will enable accounts receivable (AR) departments worldwide to send all of their outbound invoices through a single service provider and have them delivered in the preferred format of the recipient, whether digital, a PDF email attachment, or via a printing and postal service.

Its aim is to allow firms to remove friction from accounts payable (AP) processes through digital automation, thus improving their ability to respond to their customers’ needs.

The company has also launched a new purchase-order delivery and acknowledgement service in response to customer demand. The service will allow Tungsten Network members to digitally send purchase orders, while recipients will be able to accept, reject or amend them at their end.

Guy Miller, head of corporate development at Tungsten, says: “As fiscal pressures bite worldwide, more and more governments are trying to minimize sales tax leakage. The Italian government has become the first European country to address this by mandating e-invoicing for all domestic B2B transactions.

“E-billing services that marry compliance with digital process automation, like Tungsten Network e-billing, allow companies to meet these increasingly onerous regulatory standards, while also achieving significant process efficiencies. We think solutions like this will become increasingly popular as more countries follow Italy’s example.”

He says: “Italian companies are a little late on this topic: in July, many of them were still hoping to delay start-up. In middle-market companies, many CFOs delegated this topic to IT managers, not fully understanding the scope of change and the connected opportunities in terms of digitization and automation of processes.