For Japanese companies that are expanding globally, the need to comply with electronic invoicing is now an unavoidable issue. In particular, electronic invoicing is becoming mandatory in the EU, Malaysia, and other countries, and if purchasing and sales departments do not accurately understand and comply with this requirement, there is a growing risk that business competitiveness will decline. In this issue, we will explain the importance of introducing electronic invoicing and the risks associated with not complying with it, and examine the roles of purchasing and sales departments.
1. global expansion of electronic invoicing
The European Union (EU) is undergoing a major VAT reform called "VAT in the Digital Age (ViDA)," with particular attention paid to the mandatory use of electronic invoices. As part of this reform, all transactions within EU member states will be required to use electronic invoices and paper-based invoices will be eliminated. This will allow tax authorities to monitor transactions in real time and is intended to prevent tax fraud.
Several countries in Asia are also introducing electronic invoice systems, including Malaysia. In Malaysia, the use of electronic invoices will become mandatory for companies with annual sales exceeding 100 million ringgit (approximately 3 billion yen) from August 2024. Failure to properly issue electronic invoices may result in severe penalties.
2. actions required of purchasing departments
Purchasing departments are responsible for preparing accurate specifications, including electronic invoicing, for contracts and transactions with suppliers. This requires taking into account the different electronic invoice formats and reporting requirements in different countries. For example, PEPPOL (International Standard for Electronic Data Interchange) is widely adopted in the EU. If purchasing departments do not accurately reflect these specifications, the entire supply chain risks disruption.
Purchasing departments are also affected in their selection of suppliers, as an increasing number of companies are restricting their transactions with companies that do not implement electronic invoicing. If a trading partner does not support electronic invoicing, the potential for lost business opportunities also increases.
3. impact on the sales department
For the sales department, e-invoicing is a must, especially for international tenders: in countries such as the EU and Malaysia, companies that do not support e-invoicing may be disqualified from bidding on public procurement and large projects. In Italy, for example, electronic invoicing is already mandatory, and companies that do not comply risk having their transactions suspended.
The introduction of electronic invoicing will not only change the way invoices are issued, but will affect the entire sales process. Especially in international bidding, companies that can properly operate electronic invoicing can occupy an advantageous position in terms of compliance.
4. risk of penalty and examples
Non-compliance with electronic invoicing can lead to severe penalties in many countries. For example, in Italy, failure to issue an electronic invoice can result in a fine of up to 180% of the transaction value (EY US
In Malaysia, too, ignoring the obligation to issue electronic invoices after June 2024 risks serious disruption to business activities, including suspension of transactions and revocation of business licenses.
The penalties vary from country to country, but the common denominator is that the electronic invoice system has been introduced as an important measure to prevent tax evasion. Therefore, non-compliance or delays not only pose a legal risk, but can also damage trust with business partners and significantly reduce competitiveness.
5. response: collaboration between purchasing and sales departments
Coordination between the purchasing and sales departments is essential to the implementation of electronic invoicing. The purchasing department needs to create accurate specifications and ensure that the entire supply chain is ready for electronic invoicing. On the other hand, it is important for the sales department to always be aware that electronic invoicing will be required at the time of bidding, and to adapt their response to the requirements of their business partners.
It is also essential to develop a company-wide system. Implementing a system that can accurately issue electronic invoices and submit them to tax authorities will not only improve operational efficiency, but also reduce legal risks. In addition, the cooperation with the IT department must be strengthened and a system to support stable operation of the system must be in place.
Summary: Necessity of Electronic Invoice Support
Electronic invoice systems are becoming the new standard in global business. In particular, countries such as the EU and Malaysia are making electronic invoicing mandatory, and companies that do not comply are at increased risk of being penalized. By responding quickly, purchasing and sales departments can maintain their competitive edge and make the most of opportunities in the global marketplace.
The risks of failing to respond are so great that it is imperative to promote electronic invoice implementation throughout the company and be prepared to avoid being at a disadvantage when dealing with suppliers and in the bidding process.
