EY Romania Study: How Prepared Are Romanian Companies for Generalized Electronic Invoicing?

The RO e-Invoice system could become mandatory on a widespread level, starting as early as January 1, 2024, for all types of transactions between firms established in Romania.

In late July 2023, the Council of the European Union granted Romania the derogation to apply special measures for the adoption of mandatory electronic invoicing, a decision applicable for the period from January 1, 2024, to December 31, 2026.

Considering that the RO e-Invoice system has been in effect since July 1, 2022, for certain Romanian companies (for B2G invoicing, high fiscal risk products, or holiday vouchers), while most companies awaited the EU Council’s decision on widespread electronic invoicing, EY Romania conducted a study to understand how well-prepared economic agents are to integrate into the generalized RO e-Invoice system and what timeframes they need for a successful enrollment.

The good news is that a significant portion of respondents have the main goal during this period of preparing for full electronic invoicing, with the overwhelming majority (78%) being aware that tax authorities are considering making the e-Invoice program applicable on a widespread basis, possibly starting from January 1, 2024.

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However, the less favorable news is that less than 6 months before January 1, 2024, several challenges arise that would require more than half a year to resolve.

“In anticipation of a decision from tax authorities regarding the exact date when electronic invoicing becomes mandatory in Romania, companies should have already begun the process of integrating their current invoicing processes and systems with the RO e-Invoice system. January 1, 2024 is approaching rapidly, and even if authorities decide to postpone the adoption of e-Invoice to a later date or provide a grace period, as seen in the case of other tax reporting requirements like SAF-T or RO-transport, practical experience has shown us that such implementation requires at least 6-12 months, depending on the diversity of economic operations, as well as the specifics and level of integration and automation of the invoicing solutions currently used by companies,” explains Georgiana Iancu, Coordinator of Indirect Taxes and Fiscal Digitalization Practice, EY Romania.

In terms of invoice transmission channels, the EY survey reveals that the current invoicing methods within the Romanian business environment are quite diverse, with most companies using a mix of channels.

When asked about the methods currently used to issue and communicate invoices to clients, 57% of respondents stated they do so electronically (with 11% of respondents using EDI), 11% communicate through mail/courier for printed copies, 22% invoice both electronically and on paper, and the remaining 10% invoice through various channels, also enrolling in the RO e-Invoice system for high-risk products or the B2G channel.

As for invoices received from suppliers, most of them are received electronically – 44% (email, EDI), followed by courier/mail (printed on paper) – 30%, SPV, and one of the aforementioned channels for invoices related to high-risk goods or the B2G relationship – 5%, other methods (both electronic and paper) – 21%.

Regarding the data collection process for customer invoicing in the financial-accounting system, 85% of respondents indicated that the process is automatic or semi-automatic. Conversely, in terms of invoices received from suppliers, it was found that invoice data is collected significantly manually – 66%.

“This shows that, despite the potential high implementation costs, the standardization brought by e-Invoicing should eventually lead to reduced processing times and associated costs for invoice processing,” explains Georgiana Iancu.

To what extent do Romanian companies believe they are prepared for the implementation of electronic invoicing starting January 1, 2024? “We are not prepared” – 39% responded, while 32% indicated they are prepared to a 30-50% extent. Surprisingly or not, almost one-third of respondents stated that they have not yet analyzed the impact of this requirement.

“We see from the received responses that 42% of respondents have started analyzing the e-Invoice specifications and believe they have understood the requirements to a 50% extent. This indicates that there are still many details not understood by respondent companies, requiring additional analysis and guidance from tax authorities or electronic invoicing experts. This justifies the extended timelines that companies will need to comply with the new invoicing rules, as reflected in the EY survey data,” explains Georgiana Iancu.

Asked about a reasonable interval for compliance with the electronic invoicing rules through the Ministry of Finance’s available platform, respondents indicated the following: 30% of companies need 6 months to 1 year, 26% need 1 to 2 years, and 20% need over 2 years. “Surprisingly or not, 24% of respondents estimate they need up to 6 months for compliance, but we must consider that this category likely includes those companies that have already taken steps for invoicing through the RO e-Invoice system, for high-risk products or B2G invoices,” further explains Georgiana Iancu.

The main additional costs that companies expect for adapting to the RO e-Invoice requirements will be generated by the implementation of a technical solution enabling electronic invoice generation, communication through SPV, and subsequent processing of messages generated from SPV regarding e-Invoice. Over three-quarters (76%) of participating companies expressed this, followed by ensuring an audit trail between the traditional invoice and the e-Invoice (archiving, reconciliation, traceability) – 11%, additional human resources costs – 5%, while 7% of respondents are concerned about all of these constraints. Surprisingly, only 1% of respondents raised the potential impact on cash flows in the case of client payment conditioning through SPV transmission.

“The concern expressed primarily over the costs of such implementation is justified because, depending on the diversity of current invoicing channels used, all of these need to be aligned and integrated with a single invoicing channel, the RO e-Invoice. At the same time, companies will need to ensure a reliable audit trail between invoices and the goods/services invoiced from now on, as well as how invoices are recorded in accounting. In conclusion, we remind companies that electronic invoicing, complementing SAF-T, will allow the tax administration to possess a database that can act as a single source of truth. With access to all financial and fiscal data, the tax authority’s database will become the most valid version of this data. Therefore, companies need to ensure that the information from ERP systems matches precisely with what is found in the tax administration’s database,” concludes Georgiana Iancu.