The backbone of e-invoicing: the EU derogation to the VAT directive



France, Italy, Poland. What do these countries have in common? First of all, they are all members of the EU. And second, among many other similarities, they all requested and obtained a derogation to articles 218 and 232 of the 2006 EU VAT directive in order to be able to implement mandatory e-invoicing.

In this blogpost, we want to discuss how the EU derogation system works and why it is so important. In order to have a better understanding of the matter, we will first focus on the European VAT directive of 2006. This will help us to understand the articles that need to be derogated in order to implement mandatory B2B e-invoicing and how the approval from the European Commission and Council works.

EU directive 2006/112/EC

The EU directive 2006/112/EC was introduced in December 2006 with the aim of setting up a common system of value added tax (VAT) within the European Union[1]. The directive aims to integrate and replace the sixth VAT directive of 1977[2], which was considered to be outdated in relation to the new powers and territorial extension of the EU.

The new directive set a standard minimum VAT rate of 15% within the EU[3] and allows for reduced VAT rates on certain goods and services, like food. The directive also admits exemptions from VAT. Most of these are exemptions without the right to deduct, e.g. medical care, social services or financial and insurance services. However, exemptions with the right to deduct also exist, e.g. supplies of goods between Member States or exports of goods to a non-EU country. These kinds of exemptions might make it easier for fraudsters to commit VAT fraud.

In order to combat VAT fraud, the directive permits exceptions by the Member States from standard VAT rules. One of them is to apply a generalised reversal of VAT liability. This involves shifting liability for paying the VAT from the supplier to the customer.

Furthermore, the VAT directive of 2006 also sets important regulations concerning the use of e-invoices within the EU. Article 218 of the directive states: For the purposes of this Directive, Member States shall accept documents or messages on paper or in electronic form as invoices if they meet the conditions laid down in this Chapter.[4] Article 218 puts paper invoices and e-invoices on an equal footing, by demanding Member States to accept both. This concept is once more underlined in article 232: Invoices issued pursuant to Section 2 may be sent on paper or, subject to acceptance by the recipient, they may be sent or made available by electronic means [5]

The Derogation

On the basis of Article 395 of the VAT directive of 2006, Member States may be authorised to derogate from the common VAT rules to simplify the procedure for charging taxes or to prevent certain types of tax evasion or avoidance[6]. This type of derogation must be requested from Member States’ institutions to the European Commission, which is in charge of approving or rejecting the request. After the approval from the European Commission, the derogation has to be accepted by the European Council. After the formal request of derogation arrives at the EU commission, the European Institution needs to assess whether it respects the limits imposed by article 395 of the same directive. If this is the case, Member States may be allowed to derogate from EU directive 2006/112/EC.

Derogation for mandatory e-invoicing

The introduction of mandatory B2B e-invoicing is one of the cases which requires a derogation from the European VAT directive. In fact, the VAT directive demands Member States to accept both paper and electronic invoices and would not allow Member States to introduce mandatory e-invoicing without a derogation. Several EU countries have already requested and obtained a derogation from the European VAT directive. Italy was the first country to implement mandatory B2B e-invoicing after a derogation approval from the European Commission in 2019. After the approval, Italy introduced mandatory B2B e-invoicing and the Sistema di interscambio, a real-time reporting system. The combination of e-invoicing and real-time reporting successfully managed to reduce the Italian VAT gap by € 3,5 billion in the first year of implementation [7]. In 2021, Poland requested authorisation to derogate from Articles 218 and 232 of the VAT Directive to be able to implement an obligation to issue electronic invoices, processed through the National e-Invoicing System (KSeF), for all transactions that require the issuance of an invoice according to Polish VAT legislation. The derogation request was approved and allows Poland to start implementing mandatory e-invoicing from April 1st 2023 [8]. The last country that demanded and received a derogation from the VAT directive in the EU is France. At the beginning of 2022, the EU commission approved the derogation from articles 218 and 232 for France in order to introduce mandatory e-invoicing from 2024 within the framework of the e-invoicing project.


The digitalisation of VAT is rapidly advancing in the EU and all over the world. One of the pillars of this process is the use of e-invoicing. In the EU, VAT is regulated through the directive 2006/112/EC which puts paper invoices and e-invoices on the same level. In order to be able to introduce mandatory B2B e-invoicing, Member States have to apply for a derogation to articles 218 and 231 of the 2006 VAT directive. The process may take time and has to be approved by the European Commission and the European Council. Over the years, more and more European countries have adopted e-invoicing, introducing a variety of standards implemented in different ways and sometimes with real-time reporting to the tax administration. This e-invoicing puzzle within the EU is of no help for European businesses and the internal market. The European Commission has recognised this issue and is trying to propose a harmonisation of EU Digital Reporting Requirements (DRR). It will probably not be easy to find a common ground for all 27 member states but we hope that the EU Commission will come up with the best possible solution for European taxpayers.

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