An Overview of E-invoicing mandates in 2024: Israel, Malaysia, the United States
Today’s technological advancements necessitate digitization of more and more areas of our lives. The adoption of e-invoicing is one of the big transformations that is happening in multiple countries all over the world. Electronic invoicing enhances efficiency, transparency, and streamlines financial processes, but the introduction of changes in tax laws makes e-invoicing adoption a complicated operation. Each nation presents a unique set of challenges, opportunities, and regulatory frameworks concerning e-invoicing.
E-invoicing in Israel
Israel has implemented a live reporting mechanism aimed at registering invoices above a certain value. These invoices will be assigned a unique ID number by the Israeli Tax Authority platform. This allocation number must then be included on the invoice issued to the customer, ensuring that only invoices with this number are eligible for input tax credits. Compliance is thus crucial for both sellers and customers.
Originally scheduled for implementation on January 1, this initiative has faced delays due to ongoing conflicts in the Middle East. Consequently, the Israeli Tax Authority has introduced a soft landing period, during which no penalties will be enforced. The formal mandate is now set to begin on May 5, 2024.
It's worth noting that the threshold for invoice amounts starts relatively high, around ILS 25,000. However, this threshold is expected to decrease annually until all invoices are included in the system.
E-invoicing in Malaysia
Malaysia has announced the implementation of mandatory e-invoicing starting from August 2024. Firstly, there will be a Central Tax Clearance (CTC) platform overseen by the Malaysian Tax Authority. Additionally, Malaysia has established a Malaysian PEPPOL Authority under MDEC.
The PEPPOL network was initially introduced for public procurement but is now widely used for the B2B exchange of invoices. An increasing number of countries, such as France, Singapore, and Belgium, incorporate PEPPOLl into their e-invoicing mandates.
Businesses will be required to submit e-invoices and e-invoice data to the Malaysian Tax Authority's platform, initially focusing on large enterprises - the top 400 businesses in Malaysia starting from August 2024. Moreover, the PEPPOL network will facilitate invoice exchange between trading partners. These e-invoicing regulations will encompass both domestic and cross-border transactions.
While major ERP service providers are expected to connect directly to both the PEPPOL network and the tax authority platform via API connections, smaller businesses will be able to use a free portal provided by the tax authority. Technical details, such as the software developer toolkit, are anticipated to be released soon.
Furthermore, Malaysia has confirmed its adoption of the PEPPOL international format, known as the PEPPOL International (PINT). A draft version of the PINT standard for Malaysia has already been circulated. The PINT format will also be compliant with the European standard.
E-invoicing in The United States
The United States presents a unique landscape in the area of indirect tax. It stands out as one of the few countries without a federal VAT or GST system, relying instead on taxation implemented at the state and local levels. With over 10,000 distinct tax jurisdictions across the country, establishing nexus — particularly after the Wayfair decision — can occur with just a certain number of transactions to customers in a state, triggering the obligation to register for sales tax at various levels.
Given this stark contrast between state and federal taxation, it is unlikely that there will be a federal-level mandate for general B2B transactions. Instead, we may observe digital reporting requirements or perhaps e-invoicing initiatives emerging at the state level. Thus, any such developments are likely to be more voluntary and business-driven.
Recently, there has been a significant initiative led by the Federal Reserve in collaboration with the Business Payment Coalition to establish a market pilot aimed at creating an interoperability network across the United States and North America. This network, utilizing a common XML standard, has transitioned from the pilot to the production phase. Additionally, the establishment of a non-profit entity, the Digital Business Network Alliance, marks a notable milestone. The DBNA has formulated common standards and policy guidelines, facilitating the creation of a decentralized four-corner network akin to PEPPOL.
Under this system, businesses can register and connect once, enabling seamless invoice exchange with recipients across the network. Importantly, this approach allows for decentralization, permitting the use of any accredited service provider. This development carries immense potential and has already entered production, with the first invoices issued and received in recent weeks.
While not directly driven by tax mandates, the complexity of sales tax has significantly influenced the design of the standard. It enables businesses to address tax obligations at various levels: state, county, municipal, and even more granular levels. As such, this initiative is poised to garner attention, particularly from multinational corporations and ERP providers, who recognize the benefits and may incentivize customers and suppliers to adopt the standard and participate in the network.
Achieve global e-invoicing compliance with Comarch
Keeping pace with e-invoicing mandates and e-reporting regulations across the countries in which your company operates can easily become a daunting challenge. If you find yourself grappling with this complexity, Comarch offers a solution: our e-Invoicing system. This cloud-based platform is regularly updated and serves as a reliable source for e-invoicing mandate information, ensuring compliance with tax legislation in over 60 countries.
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