judge mallet on a wooden desk

Still wondering if emailed PDF vendor invoices are legal in the EU?

“For the uptake of unstructured e-invoice, the Directive is considered as having played a significant role in the Member States in which it affected the applicable legal framework. Obviously, this is not the case in countries where the e-invoicing legal framework was already liberal (such as the UK or Scandinavian countries). In the other countries, it played a positive role by simplifying the pre-existing requirements (e.g. in Germany) or by providing economic operators with the legal certainty that paper and e-invoices were both valid for claiming VAT deduction (as in Poland and Romania). 

The simplification of the national frameworks mostly results from (i) the technology-neutral formulation of Article 233, and (ii) the, possibly unintended, effect of a lax enforcement of the BCAT option. Leaving companies free to use unsigned PDFs without burdening them with stringent internal control requirements was a key lever for promoting the diffusion of unstructured e-invoices. While the simplification was important, the increased legal certainty was crucial in the countries where companies did not trust exchanging PDF invoices for fear of being challenged during tax audits. This depends on the joint provision of the new definition in Article 217(*), which clearly states what an e-invoice is, and the equal treatment principle enshrined in Article 218(**).”

Source: “Study on the evaluation of invoicing rules of Directive 2006/112/EC” by the EU

  • Page 98: bold text in orange colour 
  • Page 32: “Equal treatment between paper and e-invoices”

Additional sources

(*) Article 217: “For the purposes of this Directive, “electronic invoice” means an invoice that contains the information required in this Directive, and which has been issued and received in any electronic format.”

(**) Article 218: “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.”

Optical Character Recognition – Best Practices

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“Although the scanning of paper-based invoices isn’t considered e-invoicing, it is the natural first step for many organisations. Using Optical Character Recognition or ‘OCR’ software, the data can be moved from a paper-based format to a digital format that can be entered in the Accounts Payable system. Outside of EDI and invoice portals, OCR has been a predominant tool of choice to enable the digitization of invoices”.

Optical Character Recognition (OCR) technology is a hardware/software tool that takes a paper document, usually, an invoice, scans then “reads” it and turns it into metadata that can be used to populate fields in a database.

From there the invoice can be brought into an electronic workflow for processing. Using OCR software, the data can be moved from a paper-based format to a digital format that can be entered in the AP system. OCR is the electronic conversion (through scanning) of invoices without extractable data (either paper or image files) into data that can be integrated directly (as an EDI or XML file) into a buyers Accounts Payable finance system for payment.

Whilst OCR solutions enables organisations to automate their AP processes to a certain extent, there are restrictions that are inherent to OCR technology, and which limit its impact beyond achieving a semi-automated state, where human intervention and errors are part and parcel of the technology in question. After all, we speak of “recognition” and not “extraction” when referring to OCR. Fundamentally, OCR solutions are all based on a similar probabilistic technology and methodology. For instance, the number “1” vs. lowercase letter “L”, the number “0” vs. uppercase O, and so on. The latter is mitigated to some extent by the use of dictionaries (for example, “INVOICE” is more likely than “1NV0lCE”), but unfortunately invoice data such as the invoice number or the shipping reference, is usually not to be found in an OCR dictionary.

The challenge gets even more difficult when using OCR for invoice line item extraction. These inherent limitations of OCR result in varying accuracy recognition rates, which invariably requires human operators to check the results produced by OCR. Inaccuracies require manual intervention, leading to errors, long invoice processing time, and low percentage of “touchless” invoices or processed “straight-through”.