In the second part of this series, we saw that in the European VAT scenario the invoice is a means of exchanging information between two VAT taxpayers, which meets the legal requirements to be considered a valid record of a taxable transaction, while in the third part we saw that in the Latin American scenario an invoice is a document that records information about a taxable transaction. 

In these two previous parts we did not deal with two other important differences between the two scenarios, which are what the client receives, and what the Tax Administration (TA) receives, considering the content. 

In the EI as a document scenario, the client always receives exactly the same content as the TA, in a digital file that complies with the intrinsic document characteristics that we discussed in part three of this series. 

To analyze the EI as a means of exchanging information scenario, we need to carry out some further reflections. 

The entire European system is designed for the reality that the issuer and its customer both send to TA an extract of the invoice that is sent to the customer, containing the information relevant to VAT (while in the Latin American system, TA receives from the issuer exactly the invoice sent to the customer). 

If we focus only the scenario of invoices issued in transactions carried out between VAT payers, it is clear that if the invoice is a document it is not necessary for the customer to send exactly the same information to the TA that the issuer sent; on the other hand, in the scenario where the invoice is a means of exchanging information, the TA must compare the information sent by both parties (the issuer and its customer). 

But this is not the point (the TA’s difficulty in identifying that all the information was received, and with what reliability) that we want to investigate, but another point related to this, although independent: is it possible for one model to coexist with the other? 

All the advertising we’ve seen over the last two or three years tell us the five-corner model is the best interoperability solution. 

In this model, the issuer and its client hire service providers certified by TA, and these service providers are responsible for extracting from electronic invoices – here understood as means of exchanging commercial information between the seller and their client – ​​the information that corresponds to the legal requirements for the invoice to be considered a valid record of a taxable transaction, and transmitting this information to TA. 

To analyze the point we want to investigate, we will consider four scenarios in which the seller and his customer are established in different VAT jurisdictions, that is, regulated by different TAs: 

Scenario 1: in both jurisdictions the invoice is a means of exchanging information. This scenario is the scenario recommended by the five-corner model, that is, the TAs of both jurisdictions will receive the VAT reports extracted by the providers. It must be resolved how the TA in one jurisdiction will receive the report from the provider in the other jurisdiction; a good solution would be for providers to send reports to both TAs, but outside the European Union it will be necessary to establish criteria to resolve how a TA can resolve problems identified in the reports of the taxpayer established in the other jurisdiction. 

Scenario 2: in the seller’s jurisdiction the invoice is a means of exchanging information, and in the customer’s jurisdiction the invoice is a document. This scenario is more complex: the customer’s provider, in addition to transmitting the VAT report following the rules of this jurisdiction to the TA of the issuing jurisdiction, will have to generate the document according to the standards of the customer’s jurisdiction and transmit it to the TA of the latter jurisdiction. The problem highlighted in scenario 1 partially persists, that is, outside the European Union it will be necessary to establish criteria to resolve how the TA in the issuer’s jurisdiction can resolve problems identified in the reports of the taxpayer established in the client’s jurisdiction. 

Scenario 3: in the seller’s jurisdiction the invoice is a document, and in the customer’s jurisdiction the invoice is a means of exchanging information. The simplest of the three scenarios: the issuer’s provider transmits the document (which may have been generated by the taxpayer or its provider) to the TA in the issuer’s jurisdiction and transmits the VAT report to the client’s jurisdiction following the rules of that jurisdiction. The problem highlighted in scenario 1 also partly persists, that is, outside the European Union it will be necessary to establish criteria to resolve how the TA in the client’s jurisdiction can resolve problems identified in the reports of the taxpayer established in the issuer’s jurisdiction. 

Scenario 4: In both jurisdictions the invoice is a document, but each jurisdiction rules the document differently. The simplest of the four scenarios is, as each provider will generate the document from the corresponding jurisdiction and transmit it to the respective TA. 

In all scenarios, the customer receives potentially translated commercial information at least once, if the formats at the three communication points are not the same; this possibility is inherent to the five-corner model, and it makes no difference whether or not it is considered a liability, especially in the light of the interoperability resulting from the adoption of the model. 

On the other hand, if the issuer and its client are established in the same jurisdiction where the EI is a document, both the TA and the client receive this document, it is not necessary to adopt the five-corner model, and the analysis we are performing is not relevant. 

Likewise, if the issuer and its client are established in the same jurisdiction where the EI is a means of exchanging information, there is also nothing to analyze, as there is a single TA involved in the process. However, the potential risk remains that information received by the customer has been translated more than once along the chain of providers, and the burden for TA to compare the information from both taxpayers. 

After the reflections exposed in the posts that form this series, it is possible to state that, without discussing the weaknesses and strengths of each of the models, using providers certified by TA in a five-corner model, it is possible for the EI model to coexist as a document in one jurisdiction, with the EI model as a means of exchanging information in another jurisdiction, if the points of attention highlighted in the four analyzed scenarios are resolved. 

An indication that something of this type is already occurring to some extent is that all electronic invoicing solution providers that operate in more than one jurisdiction already have functionalities that allow a company to issue FEs according to the rules of the different jurisdictions; What has not yet been observed is the possibility of integration with the information that the customer must provide. 

After all this talk… what does the expression “Electronic Invoice” mean? 

My answer is, as many people who know me are used to, short, clear, direct and objective: it depends. On the objective, the context, the culture, the country…  

In my view there is not a single answer, there are many answers, but the one I like the most is that comes from the first post in this series: Electronic Invoicing is an immaterial record of information about a commercial transaction. 

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