Singapore announces a nationwide framework for B2B e-invoicing
Singapore was one of the early adopters of e-invoicing in the Asia Pacific region. Since 2008, e-invoicing has been mandated for all e-invoicing business to government (B2G) transactions. But, when it comes to B2B e-invoicing in Singapore – as a country with a legal system based on common law – has until now focused mainly on record retention. What this means is that there are few rules related to how an e-invoice is issued, but more controls on how they are archived.
This might change as Singapore has announced that it intends to adopt a nationwide, interoperable e-invoicing framework. The aim of the framework is to help businesses cut costs, boost productivity and speed up payments while reducing errors and allowing them to access new finance options.
In announcing the new framework the Minister for Communications and Information (MCI) in Singapore, stated that improvements to the way invoices are issued were critical for the B2B sector:
“Without an invoice, businesses do not get paid. But invoicing can be very tedious and manual, with many inherent errors. E-invoicing can change that.”
The new framework will constitute a “common infrastructure” that will accelerate business productivity and digitalization within Singapore’s private sector.
The current situation of B2B e-invoicing in Singapore
Within Singapore’s B2B sector there are ‘multiple fragmented standards’ in use. In accordance with the MCI’s communication, e-invoices should be issued in a structured format, as opposed to non-structured formats like a pdf, in order to allow for the automated processing of data and improve the speed with which invoices are sent and received.
The Info-communications Media Development Authority (IMDA), is now in the “exploratory stage” of evaluating the existing standards and frameworks used by different countries and businesses. As part of this evaluation the following early-stage targets on the road to the adoption of the new framework have been set:
- Evaluation by the IMDA of existing technologies, applicable standards, and governance frameworks of various e-invoicing networks to determine what should be adopted or created for Singapore.
- The adoption of an ideal standard that should meet both Singapore’s domestic needs while also having an international outlook.
The IMDA plans to announce more details later this year.
The trend to e-invoicing in other Common Law countries
The move by Singapore follows a trend we are seeing in common law jurisdictions across the globe.
In Australia, the Australian Digital Business Council (ADBC), has developed an Australian e-Invoicing Framework which is underpinned by international standards. This framework, which was published in July 2016, is currently used for business to government (B2G) transactions but is expected to be used in B2B scenarios as a second step.
The United States is also in the initial stages of selecting a technical e-invoicing standard. But before a technical standard can be established there is a need to catalog the current e-invoice standards in use by U.S. businesses. That is why the Business Payments Coalition convened an E-Invoicing Work Group that has come up with the “Catalog of Electronic Invoice Technical Standards”. This should lay the foundation for the U.S. market to select an invoice standard to accelerate the adoption of e-invoicing by U.S. businesses.
The new world order
The shifting focus within common law territories begs the question what the new world order will look like? Will improvements be made to drive business efficiency or tighten VAT controls to reduce the VAT gap? Globally we’re seeing a trend toward the clearance model, whereby governments place themselves in the issuance of an invoice to enable real-time, or near real-time control. In the past decade countries, such as Brazil, Chile and Mexico have been pioneers in this field. The pursuit of digitalization of e-invoicing will drive process efficiency and cost savings, but in the end, is its adoption a stopover on the road to tightening VAT controls?
Joanna Hysi, Legal Counsel, TrustWeaver