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Factur-X, the future of the electronic invoice?

Factur-X, the future of the electronic invoice?
08/01/2021

Factur-X was introduced in France in July 2017. On this date, the FNFE (National Forum of Electronic Billing) presented Factur-X as the future standard of electronic invoices.

But the future implementation of this so-called mixed invoice format is also linked to a legislative and technological context. In effect, the tax authorities are pursuing an incentive policy to the transition to paperless billing. The shift to electronic invoices is accelerating globally: 2.5 billion inter-company invoices are issued each year, 15% in 2019 were paperless, compared to 5% in 2015. Find out all the ins and outs in this article!

The shift to electronic invoices is accelerating

In their fight against VAT fraud, the government is pursuing an incentive policy to move to paperless billing.

Simplification of the paperless processes

Until 2014, paperless invoicing was a billing process based on the EDI (Computerized Data Exchange) Tax or EDI DMF. As of 1 January 2014, companies’ choice of electronic invoice processes expanded to include PDFs:

  • Electronically signed PDF invoices,
  • Simple PDFs, provided that permanent controls establish a reliable audit trail, and the dispensing of paper invoices is subject to the same conditions.

New obligations for all businesses

  • Since 1 January 2020 an extension has been granted to all companies regarding their obligation to commence paperless invoices in the context of public procurement (B2G or Business to Government),
  • Article 153 of the Finance Act 2019-1479 of 28 December 2019, progressively makes the use of the paperless invoices compulsory in B2B (Business to Business) exchanges from 2023, and for widespread use for all businesses by 2025.

However, in practice, with the exception of the EDI, there is no standard for paperless billing accessible to all businesses. Only secure invoice channels.

What secure invoice channels exist today?

Let’s discover the channels that provide a digital file, image or PDF, the same authenticity and legal value as the original paper invoice (with unalterable integrity). But also the channels available to legally archive these invoices for the legal period of 10 years, and transmit invoices from the transmitter to the receiver.

Tax EDI as a paperless bill channel

The EDI allows the direct sending of paperless invoices from the information system of the issuer to that of the receiver. This mode is that of large companies, and requires significant software investment and prior agreements between issuers and receivers on the formats and structures to be used. In economic sectors such as Automotive and Retail, contractors rely on standards bodies (GALIA, GS1),to promote electronic invoices to companies.

Supplier portals as a means to file invoices

The vendor portal on which the issuer comes to deposit its invoices in the form of digital files (simple or signed PDFs, and image formats). EDF and the major construction groups all have intranets open to their subcontractors, on which they exchange documents, tenders, quotes, invoices, etc. Chorus Pro, developed by AIFE (State Financial Informatics Agency), is a portal of public services for filing B2G invoices. This mode of operation requires supplier authentication controls and specific data processing before the invoices are integrated into the official accounting systems.

E-bill attachments

When the sender transmits digital invoices to a receiver’s mailbox as an attachment. Upon receipt, billing data will need to be manually entered in a central database like a spreadsheet, or a LAD/RAD (Automatic Document Recognition Reading) solution will be used to automate the process. This method is simple to implement, and removes the need for paper. But it requires the maintenance of a reliable audit trail similar to that utilized for the paper invoice, during tax checks.

Is Factur-X accessible to all companies?

Is Factur-X, presented in 2017, the solution for a generalized process of paperless billing for all companies, as its promoters predict?

How does it work? And, finally, what future does it have?

Factur-X is a Franco-German standard electronic invoice published in France on 9 July 2017 by the FNFE. This type of invoice is also called a mixed or hybrid invoice able to be read by man and by machine. Factur-X is a PDF/A3 file that incorporates an XML file containing billing data in structured form.

Factur-X is therefore readable as a PDF invoice and is also read directly by information systems without going through complex LAD/RAD operations.

So that the Factur-X can be received and processed by all companies, that wish to be able to integrate it directly into their information system, its standard format allows several data profiles to be structured according to regulatory and business requirements:

  • MINIMUM profile: minimum data required by the Chorus Pro portal,
  • BASIC and BASIC WL profiles: minimum data with or without bill lines,
  • Profiles EN 16931 and EXTENDED: compliant with new European billing standards.

Thus, issuing companies can charge electronically and benefit paperless invoices without worrying about whether or not their partners can process a paperless invoice.

The simple implementation of Factur-X

For the invoice-issuing company, the implementation of the Factur-X format is simple. It requires no billing software changes, and no significant investment.

All the issuer has to do is continue to edit their invoices in PDF format with all the usual legal and business requirements required.

To convert the PDF invoice to a Factur-X, it will need to go through an intermediary or paperless platform to support the conversion of the PDF to PDF/A3 format. The sender, for example, can opt for a PDF/A3 format signed electronically with a RGS (General Security Reference) certificate. The PDF/A3 invoice is then sent to the receiver. The information is recorded and in this way, the issuing company frees itself from the obligation of recording a reliable audit trail.

At the initiative of the issuer

Previously, the switch to electronic invoices was imposed by a company’s contractors. Each contractor imposed its own electronic invoice channel on its suppliers by various means:

  • EDI Fiscal, where the issuer then had to invest in an EDI solution,
  • An intranet portal on which the supplier filed its invoices in PDF format requested by the client,
  • A simple or signed PDF sent to a dedicated mailbox.

That system created as many invoice channels as commercial partners. By adopting the Factur-X, the issuer takes the initiative to simplify its paperless billing.

Factur-X will accelerate the transition to paperless invoicing.

Factur-X fills the system compatibility gap with a paperless standard that is financially and technically accessible to all small, medium, and large businesses. Nevertheless, EDI tax remains the standard for large companies who trade with subcontractors.

After Factur-X, what is the future of the electronic invoice?

As of 1 January 2025, all B2B and B2G billings will be paperless.

Will this obligation to go paperless be extended to e-commerce? BtoC (Business to Customer)? These questions still await an answer.

Yet already with the general adoption of the electronic invoice, all invoice data can be communicated to the tax authorities so that it can exploit them for VAT control purposes. This allows the tax office to automatically cross-reference all issued and received invoices, and propose pre-filled VAT returns.

Does the generalization of the electronic invoice with Factur-X pave the way for a new billing model? The Clearance model is certainly one of the options on the table. To find out more, please consult this excellent article on the Clearance model.

Tenor has been supporting its customers in the management of their data for more than 30 years. Paperless/EDI invoices are no longer tricky for our teams. In contrast, our paperless tax solutions are already operational for a smooth transition to Factur-X. Contact-us for more information.