Companies conducting transactions across the Asia-Pacific (APAC) region face the crucial task of staying informed about recent legal changes in e-invoicing. The evolving nature of electronic invoicing requirements, coupled with a diverse range of invoice exchange models, makes it imperative for businesses to adapt. The Billentis global market report underscores the significance of this shift, projecting the APAC region to achieve the highest annual e-invoice volume growth rates compared to Latin America and Europe until 2025.
The APAC market, with its diverse landscape, is gradually embracing e-invoicing, with Singapore, Hong Kong, Taiwan, and South Korea leading the digital evolution. This article aims to provide an overview of the current state of electronic invoicing across Asia and its ongoing evolution.
E-invoicing the APAC region: countries pioneering the digital shift
Singapore has been a trailblazer in the adoption of e-invoicing in Asia. In 2003, the use of electronic invoicing in Singapore began, and by 2018, it was mandatory for all government authorities. A year later, Singapore took another leap by adopting the common PEPPOL format for the exchange of e-invoices, making it the first country outside of the EU to join the network.
While B2B e-invoicing remains non-mandatory, the Infocomm Media Development Authority (IMDA) strongly recommends its implementation, with various unmandated standards available. Under the IMDA’s initiative, the InvoiceNow network was established in 2019, specifically dedicated to private sector e-invoicing. Recently, the Singaporean government revealed plans to extend the usage of InvoiceNow to B2G relationships. This initiative involves sellers in the public sector issuing all electronic invoices through InvoiceNow, gradually replacing the vendors@gov portal over the next few years. Suppliers are required to adopt solutions that facilitate invoicing through this new mandatory method during this transition period.
In South Korea, a notable level of economic development and increased market liberalization have contributed to the widespread adoption of electronic invoicing. The South Korean government is actively fostering a legislative environment focused on reducing paper usage in trade and transactions. Notably, since 2014, the use of e-invoices has been compulsory for an increasing part of private sector companies.
In July 2022, the mandatory e-invoicing was changed to KRW 200,000,000, and non-resident digital or electronic service providers are now required to engage in on-demand transaction reporting. Taking a step further, in July 2023, the threshold was further reduced to KRW 100,000,000.
While South Korea does not employ a clearance model, it is essential to note that digitally signed invoices must be transmitted to the Government Tax System within one day of their issuance, underscoring the government’s commitment to efficient and timely fiscal processes.
Other APAC countries blazing the trail to e-invoicing
In Hong Kong and Taiwan, the combination of free trade and highly developed industrial bases proves to be pivotal for the widespread adoption of e-invoicing. A study by Atradius revealed that, in 2018, over half of Hong Kong companies utilized electronic invoicing for B2B transactions, showcasing a significant embrace of digital financial processes.
Additionally, both regions exhibit extensive electronic document interchange at the government level. Nearly all government documents are equipped with authorized electronic authentication, providing the option to sign and issue them electronically.
In Taiwan, e-invoicing has been standardized and is mandatory for companies and businesses paying value-added tax. However, it has not yet become obligatory for commercial transactions. This reflects a strategic approach to digital financial practices, emphasizing efficiency in tax-related processes while leaving room for flexibility in other business dealings.
Other APAC countries on the e-invoicing journey
In Japan, the prevalence of cash payments and the utilization of promissory notes present challenges for the widespread adoption of electronic invoicing. According to the TFIG, only 0.2% of Japanese businesses are currently registered to use e-invoicing. However, there is a notable initiative by the tax administration to encourage its implementation across government organizations.
A significant stride in this direction was the introduction of the Qualified Invoice System (QIS) in October 2023, modeled to function similarly to the VAT system in Europe. Under this system, Japanese Consumption Tax payers can only recover the input JCT if a qualified invoice is issued by a certified party. In a further development, starting in January 2024, Japan is set to mandate the storage of accounting records in digital form, reflecting a commitment to modernizing financial practices.
Additionally, Japan has embraced the electronic exchange of documents through the PEPPOL network. Since November 24, 2022, Comarch has been officially recognized as a PEPPOL Service Provider in Japan, signaling a positive step toward facilitating electronic document interchange in the country.
China’s Golden Tax System mandates electronic invoices (e-fapiao) in special VAT and general VAT forms. While special VAT e-fapiao is common in B2B transactions, the persistence of paper invoices requires registration on the government portal or the Golden Tax System.
A pilot program for mandatory electronic special VAT invoices began in December 2021, and by December 2023 it was introduced in all provinces, including Tibet. Megacities achieved full implementation in 2022, with a definitive, obligatory nationwide adoption anticipated by January 2025.
Utilizing the Public Service Platform of Electronic VAT requires a valid certificate and electronic signatures for each invoice. E-invoices operate on a clearance model, necessitating registration on the STA platform before transmission.
Though the Chinese state doesn’t mandate electronic invoices, sectors such as telecommunications, insurance, e-commerce, and large retailers can use them with prior authorization. Accredited software in the operational region is mandatory.
India, like China, is an economic powerhouse with relatively low trade liberalization. E-invoicing’s legal status in India is unclear, leading to the simultaneous issuance of digital and traditional paper invoices. Since 2017, e-invoices have been permissible for GST payments, with ongoing government considerations for mandatory adoption.
Mandatory e-invoicing has been progressively rolled out in India since October 2020, extending to taxpayers with turnovers exceeding INR 5 crores since January 2023. Utilizing the Invoice Registration Portal (IRP) infrastructure, companies submit JSON format invoices to the IRP, receiving an invoice reference number and QR code. The IRP lacks authorization to store invoices, with approved, digitally signed ones uploaded to the GST system. Indian legislation mandates digital signatures for ensuring e-invoice integrity under the IT Act.
Electronic invoicing as a weapon against fraud
In certain countries, implementing a well-thought-out e-invoicing mandate proves to be a valuable tool in the battle against tax fraud. In Mongolia and Azerbaijan, taxpayers have been obligated to issue digital invoices since 2017, effectively closing the tax gap by providing real-time information to the tax authority. This initiative has also been in place in Kazakhstan since 2019 and Indonesia since 2016.
The Indonesian e-invoice system, e-Faktur Pajak, launched in 2013 and was implemented for tax invoice issuance by the Directorate General of Taxation (DGT) in July of the following year. Presently, all Indonesian companies, including those with branch headquarters within the country, were mandated to use e-invoicing through the e-Faktur platform. The phased introduction started with Java and Bali-based taxpayers in 2015, extending to all companies by 2016 for precise tax reporting.
Indonesia stands out in Asia for its widespread use of the clearance model for e-invoicing. Taxpayers must acquire an electronic certificate, request serial numbers, and register invoices through a government application. Pre-approval is essential before sending invoices to buyers, involving verification and QR code integration. Additionally, e-invoicing serves as the foundational basis for comprehensive tax reporting.
In Vietnam, e-invoicing became mandatory for taxpayers in November 2020, and by July 2022, businesses were required to issue e-invoices to buyers, digitally report transactions to the tax authority, and seek approval from the General Department of Taxation by registering on the GDT website. The gradual and optional implementation of e-invoicing began in 2011 after a two-phase nationwide pilot using the clearance model conducted by the GDT.
The XML format is the mandated data format for electronic invoices, encompassing invoice data and required digital signature data, with a 10-year retention period. Companies in Vietnam can opt to transmit electronic invoice data directly or through an authorized e-invoicing provider. Taxpayers must transfer invoices to the GDT to obtain a unique verification code before sending them to buyers. All enterprises and economic organizations are obligated to use electronic invoices with tax authority codes when selling goods or providing services, with specific exceptions outlined.
E-invoicing’s impact on APAC markets in 2024
The position of electronic invoicing in the APAC region in 2024 will remain dynamic and challenging to predict. Despite varying growth patterns, the trend of introducing new e-invoicing mandates is likely to continue, influencing trade practices, enhancing auditioning processes, and preventing fraud.
As the APAC region continues to witness the evolution of e-invoicing, companies must remain adaptable to navigate the changing landscape. The incorporation of e-invoicing into business practices may become standard, driven by the progressive liberalization of trade and the desire to enhance financial processes. For a comprehensive understanding of e-invoicing policies in other countries, including Australia, Saudi Arabia, Turkey, and New Zealand, download our recent White Paper: E-Invoicing Policies Around the World.