Are you doing business in France? Be prepared for e-invoicing!

In the coming months, France will implement a mandatory e-invoicing scheme for all B2B French transactions. All companies established in France and subject to VAT, including French subsidiaries and branches of foreign companies, must start preparing for this change.

Content and objectives of the reform

French government, through article 26 of the amended Finance Act for 2022, introduces electronic invoicing for professional transactions. From 1 January 2024, all companies established in France and subject to VAT will have to issue and receive their invoices in electronic form, i.e. in a structured format. Invoices will have to be sent either via the French public e-invoicing portal “Chorus Pro’ (already used for transactions with public sector), or via another registered digital platform, which will transmit the invoicing data directly to the tax authorities.

In addition, regarding transactions outside of the scope of e-invoicing, such as B2C transactions and transactions with foreign companies not established in France, the new measures also include an e-reporting obligation. This obligation involves the electronic transmission of transaction and payment data to the tax authorities.

Also, all companies will be required to include new mandatory information on the invoices they issue (buyer’s identification number, delivery address, transaction type etc).

This reform, led by the Public Finance General Directorate (Direction Générale des Finances Publiques), has a number of key objectives, including improving VAT reporting and fighting VAT fraud, as well as strengthen the competitiveness of companies, by reducing payment time and administrative burden. Plus, in the long term, e-invoicing is expected to facilitate VAT declarations by the pre-filling of data.

Scope and application of e-invoicing: what does it mean for foreign entities?

The new e-invoicing scheme is limited to domestic transactions between VAT registered companies in accordance with Article 256 A of the French General Tax Code. As a result, while foreign taxable persons are not directly concerned, they will be subject to e-invoicing when carrying out B2B transactions through a French subsidiary or branch.

In addition, foreign companies not established in France may be subject to the e-reporting obligation for transactions located in France, if the transaction they are carrying out is with a non-taxable person (e.g. a consumer) or a taxable person not established in France.

Nevertheless, it is important to note that the development of e-invoicing in France is part of the European Union's commitment to simplify and modernise taxation in the digital age. The European Commission’s ambition is to harmonise the use of e-invoicing throughout the European Union. Therefore, EU B2B transactions may also be subject to e-invoicing in a near future as well.

Reform timetable: Where and how to prepare it?

The previous timetable for the reform provided for a three-stage implementation starting in July 2024. Electronic invoicing and e-reporting was to become mandatory:

• On July 1st, 2024, for all companies, regardless of size, and for large corporations;
• On January 1st, 2025, for transmission by ETIs;
• January 1st, 2026, for SMEs, VSEs and micro-businesses.

In order to provide the necessary time for the reform to be successful, in the summer of 2013 the French government announced a postponement of this timetable. The new timetable will be announced when the Finance Act for 2024 is published.

In anticipation of the new postponement date, subsidiaries and branches of foreign companies in France are invited to assess their current invoice management processes and invoice flows as of now and to take the necessary steps to be operational by the set deadlines. Companies will have to equip themselves with an IT infrastructure and digital tools suitable for issuing and receiving electronic invoices. Contracts with suppliers of electronic invoicing solutions will have to be revised to take account of the new constraints. The acceptance phase for the new solution must be carried out from start to finish.

The time to comply is now, bearing in mind that failure to comply with the new legal framework can result to fines up to twice EUR 15,000 per year (once for lack of e-reporting, once for lack of e-invoicing).

The Digital Business team at Simmons & Simmons Paris is at your disposal to help you succeed in this key stage of the digital transformation of your business.