Tuesday, December 13, 2011

Electronic bills (E-bills) for the Spanish market


In this article we will go into more detail on the following questions questions about electronic invoices:

- What is an electronic invoice?

- What are the benefits of implementing electronic invoices?

- What are the principal laws governing the use of electronic invoices in Spain?

- Which types of electronic invoices are recognized in Spain?

- How can I convert paper invoices into electronic invoices and vice versa?

First of all, we want to point out that there are many synonyms for digital billing: digital invoicing, electronic billing, electronic invoicing, e-billing, e-invoicing, telematic billing, telematic invoicing, etc.

What is an Electronic Invoices or e-Invoices

An electronic invoice (also called an e-invoice or eBill) is the result of a billing method that doesn't require a paper copy as a backup in order to demonstrate its authenticity. For this reason, an electronic invoice functions as a software-generated file, which compiles the information related to a commercial transaction, its payment and corresponding tax obligations.

Although we know perfectly well what an invoice is, its technical definition is "a document that reflects the delivery of a product or the provision of services, along with the due date and the amount to be paid in consideration."

All invoices, regardless of the way in which they are sent (whether on paper or in electronic format), must include a series of mandatory fields. Article 6 of Royal Decree number 1496/2003, Spanish law, which regulates the content of an invoice, establishes these fields as:

- Invoice number

- Delivery date

- Sender's and recipient's legal name

- Sender's and recipient's Tax ID number

- Sender's and recipient's legal address

- Transaction description (tax base)

- Tax rate

- Tax amount

- Date of service (if different from the delivery date)

In order to comply with regulations and ensure that an electronic invoice has the same legal validity as a paper invoice, the corresponding electronic document must contain the same mandatory fields as any other invoice, must be signed with an electronic signature based on a recognized certificate and must be sent from one computer to another with the parties' mutual consent. This combination of factors provides a Telematic Invoice with sufficient reliability so as to indisputably guarantee its integrity and the authenticity of its origin.

Electronic invoices provide an important means of reducing the costs of processing, sending, distributing and maintaining invoices, resulting in a simplification of administrative procedures and a considerable reduction in the amount of time and space consumed, as the invoices are transmitted through telematic means, accomplished by applying technical certification mechanisms (electronic signatures), which guarantee the basic elements required in any invoice (the authenticity of its origin and integrity of its content) and allow them to be maintained in digital format, which affords immediate access to them at any given moment.

Electronic invoices contain all of the information required in a traditional, paper invoice in an encrypted format, including data on the sender and recipient, such as their name and Tax ID number, the date of the invoice, the sender's legal address, the amount of the invoice and the percentage and amount of VAT, among other information.

Furthermore, the document includes an electronic signature, which is generated using a digital certificate that has been provided to the sender of the invoice by a Tax Agency-approved certificate company. This combination of factors provides a Electronic Invoice with sufficient reliability so as to indisputably guarantee its integrity and the authenticity of its origin.

Electronic invoices encourage organizations to discontinue the use of paper invoices, replacing them with a digital version of an electronically-generated tax document, which has the same legal validity as the traditional version and preserves a faithful record of all commercial transactions. In this way, the entire billing process can be administered electronically. However, it is important to remember that amount of Value Added Tax must be included on every Invoice.

Benefits of Implementing Electronic Invoices (e-Invoices or eBills)

Depending on a company's volume, the savings related to invoice management (receipt, storage, search, signing, returning, payment, shipping, etc.) can fluctuate between 40% and 80%. Some of the reasons for this savings are:

- Timeliness, both in receiving and sending the information

- Savings on paper supplies

- Ease of auditing

- Increased security and document control

- Decreased possibilities for falsification

- Easy access to the information

- Reduction in the space required for storing archival documents

- Quicker and more efficient administrative procedures

Automating as many processes as possible through an integrated solution, which optimally manages these tasks, results in a directly proportionate decrease in opportunities for human error while increasing the opportunities for savings and improved efficiency. Even collections can be managed automatically, sending the corresponding overdue notices as certain pre-defined thresholds are reached.

Furthermore, when companies employ this technology, they are motivated to digitalize other documents, thus achieving efficiency and savings in additional areas of the business. Control of taxes is also increased with electronic billing because it allows for greater control over tax compliance and simplifies the auditing process.

The Principal Laws Governing Electronic Invoices (e-Invoices or eBills)

In Spain, Directive number 115/2001 generally applies, although these regulations have also been reinforced in national policy, particularly in the following laws:

- Royal Decree number 1496/2003 Billing Regulations.

- Royal Decree number 87/2005 Amendments to Billing Regulations.

- Ministerial Mandate number EHA/962/2007 of April 10th (entered in the Federal Registry on April 14th, 2007), which further develops specific provisions for telematic billing and digital storage of invoices, elaborating on Royal Decree number 1496/2003 of November 28th, where the regulations governing billing-related obligations were adopted.

- Ministerial Mandate number PRE/2971/2007 of October 5th (entered in the Federal Registry on October 15th, 2007) concerning invoices issued through electronic means when the recipient is the General State Administration or a public organization associated with or dependent on it, as well as the submission of invoices issued by individuals to the General State Administration or the public organizations that are associated with or dependent on it.

Various self-governing provincial councils (in Alava, Guipuzcoa, Navarra and Vizcaya) have reproduced these same regulations, appending a translation of them in Basque dialect.

Types of Electronic Invoices

An electronic invoice is one which meets the same requirements that apply to invoices issued on paper, except that it is presented in electronic format and its authenticity and integrity are guaranteed. In order to guarantee a document's authenticity and integrity, there are three possible methods:

- Utilization of a recognized digital signature, which is based on a recognized certificate and generated using a secure device for creating signatures.

- Remittance through an "EDI" system, which ensures integrity and authenticity.

- Use of another system which, in the opinion of the Auditing Department of the State Tax Agency, ensures authenticity and integrity, whenever the taxpayer issuing the invoice has applied for Agency approval of the system in question.

In general, the use of a recognized electronic signature is considered to be an essential element of electronic invoices.

The Conversion of Paper Invoices into Electronic Invoices and Vice Versa

The recent publication of Ministerial Mandate number EHA/962/2007 defines the elements necessary for converting paper invoices into their electronic equivalent, establishing that the digitalization process must guarantee that the result is a faithful reproduction of the original, paper document and that the digitalization device (scanner) must produce the image along with a Qualified Electronic Signature (as defined in Directive number 1999/93). The process through which this is accomplished is designated as "Certified Digitalization."

Furthermore, these regulations state that electronic invoices can be transcribed on paper, including the graphic marks certifying their authentication, produced according to PDF 417 specifications, as set forth in Resolution number 2/2003 of February 14th of 2003 by the General Board of the State Tax Administration Agency, covering specific aspects related to telematic billing.

There are, however, no formal requirements regarding the manner in which an invoice must be encrypted.




Julia Sanchez Meynial - Marketing Director
Pixelware - We Specialize on Information, Records and Business Processes Management
Web: www.pixelware.com/en/home.htm

Among others, Pixelware has created diverse Business Solutions for the Electronic Invoicing and Document Process Management, which facilitate compliance with the regulations governing electronic invoices or e-invoices.





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