Home>Specials>Business>Guide to E-invoicing in the ASEAN Region

Guide to E-invoicing in the ASEAN Region

E-invoicing in the ASEAN Region

Electronic invoicing is becoming increasingly popular on a global scale, gradually replacing both the classic paper invoice and the PDF invoice. For all those who still don’t know what it is. Electronic invoicing, more commonly referred to as e-invoicing, is simply the automatic exchange of invoices using a predefined electronic format, which improves efficiency, helps to reduce costs, and allows invoices to be paid much more quickly. In many countries it is no longer a trend, but mandatory, and many companies are switching to new business and organizational models, resulting in a significant digital transformation, using modern e-invoicing solutions.

The implementation of e-invoicing is also accelerating in Asia, especially in the south-east, where governments are gradually introducing mandatory e-invoicing regulations, with new laws for B2B and also B2G transactions. The move to e-invoicing certainly implies a change in invoicing processes for companies, which for some may be viewed with some trepidation, but which certainly brings many benefits to all companies in the supply chain network.

In this article we will explore how it is speeding up e-invoicing in the ASEAN region, and the benefits that are attracting the interest of a growing number of companies and government authorities.

E-invoicing models adopted in ASEAN

As mentioned previously, e-invoicing is already mandatory in many countries around the globe, and the number is continuously increasing. The e-invoicing process is not fully harmonized worldwide; there are basically two types of e-invoicing model, commonly known as clearance and post-audit.

Post-audit VS clearance

In the post-audit model, invoices are exchanged directly between the buyer and the seller, and tax authorities audit transactions after their successful completion. This model is mainly popular in Europe and in some countries of the commonwealth, but many countries are now moving towards the clearance model, in which the tax authority requires real-time approval of the e-invoice before it is valid and ready to be sent.

One of the main goals of e-invoicing is to prevent tax fraud and improve trade, hence some countries, including in the ASEAN region, are pioneering and experiencing significant expansion in the use of e-invoicing. Other countries in the region are also gradually adopting the e-invoicing system, where the most popular models are clearance models, with several continuous transaction controls (CTC), near real-time reporting and an authorization platform to ensure tax authority approval prior to exchanging invoices.

Following government regulations, companies are increasingly required to generate and submit their invoices in an electronic format. However, each country has adopted different legal regulations.

The current e-invoicing landscape in ASEAN

Singapore is one of the first countries to have introduced e-invoicing in ASEAN. The regulations have been in place since 2018, and e-invoicing is mandatory for public authorities on the basis of the PEPPOL interoperability framework. The main reason for taking these measures included the need to improve operational efficiency, minimize costs, streamline the process of payment cycles, and create a solid basis for continuing with progressive digitization.

Indonesia can also rely on an advanced e-invoicing system, as the government has implemented an e-invoicing system, e-faktur Pajak, based on the clearance model. All invoices must be approved by the tax authority before being sent to the customer, helping to prevent tax fraud while improving trade in the country.

Other governments in the ASEAN region are also progressively implementing e-invoicing, such as Vietnam and the Philippines. In Vietnam, the use of e-invoicing became mandatory from 1 July 2022 for all taxpayers. In fact, the General Department of Taxation (GDT) has presented a roadmap for the implementation of e-invoicing with a two-phase pilot program across the country, encouraging companies which are ready to embrace e-invoicing by applying in advance and beginning the implementation process. In the Philippines, the Department of Finance (DOF) launched the pilot program for the nation’s 100 largest enterprises on 1 July 2022, developing a system similar to that used in Korea, with the intention of implementing it for the remaining taxpayers by 2023 in several phases.

In Thailand, electronic invoicing is voluntary. The Thai government has not published any regulations on timelines to make it mandatory, but it is already possible for VAT parties to send electronic invoices and receipts on a voluntary basis using the e-Tax system (which is dedicated to electronic invoicing). Electronic documents such as invoices, credit notes or debit notes are required to contain certain data such as VAT amount, name and address of the buyer and purchasing costs of the goods or services. This data must be exported and transmitted to the Thai tax authority every month. An e-Tax platform is capable for creating XML files to be sent to the Department of Revenue and automatically delivered to the buyer or recipient of the service.

Electronic invoicing will also become mandatory in Malaysia, in accordance with the Ministry of Finance’s Pre-Budget Statement 2023. The aim of this statement is to strengthen economic recovery and facilitate reforms to achieve long-term sustainability of socio-economic resilience. The government is working to accelerate digital transformation in order to positively impact society and the economy, and improve quality and services.

Other Asian countries adopting the e-invoicing system

Elsewhere in Asia, the implementation of e-invoicing is already advanced, such as in South Korea, Taiwan and Hong Kong. Together with Singapore, these countries can be considered pioneers for the development of e-invoicing in Asia.

In South Korea, e-invoicing has been in place since 2010 for B2B and B2G transactions, where all taxpayers are obliged to transmit invoices to the tax authority via the National Tax Service (NTS) with a digital certificate in XML format.

Taiwan and Hong Kong have also taken important steps to implement e-invoicing, resulting in significant benefits for domestic and international trade. Furthermore, these two countries benefit from free trade and a strongly advanced industrial basis, aspects that are directly related to the use of e-invoicing. In Hong Kong, e-invoicing is mandatory for transactions with the government (B2G), and virtually all government documents are electronically authenticated and allowed to be signed and issued electronically. In Taiwan, electronic invoicing has been standardized and mandatory for all companies since 2021.

China also introduced an e-invoicing system from 2020. It is called e-Fapiao, and there is a five-year digitization process that will increase the implementation of e-invoicing in all regions of the country.

India is another country that has opted for mandatory e-invoicing, starting in 2021, where the obligation covers all B2B transactions and companies are required to use the new e-invoice reporting system.

In Japan, the government has also decided to launch e-invoicing, with the intention of making it mandatory from 2023. The EIPA (E-Invoice Promotion Association) and the government worked closely with OpenPEPPOL in order to develop a specific Japanese standard that fulfils the country’s business and legal requirements. The basis of the Japanese model will be PINT, which is an international version of Peppol, based on BIS Billing 3.0. A version has been designed to comply with international requirements.

Key advantages of e-invoicing solutions

Which benefits are attracting interest from a rapidly growing number of Asian companies and governments authorities? Here is a list of some of them:

  • Saving time: the creation, sending and archiving processes is made much easier
  • Saving money: no more postage and printing of documents
  • Saving space: with digital archiving, filing cabinets disappear
  • Secure archiving: with valid e-invoicing software, it is possible to store and manage sent and received invoices easily for the legally required retention period
  • Simplicity and ease of use: a good e-invoicing system is straightforward and offers continuous support
  • Security in data management: sensitive data can be protected by the interchange System which collects and monitors data sent and received
  • Usability: the e-invoicing system can be used over the network, allowing the creation of e-invoices wherever the user wants to do it
  • Tax reductions: the state always provides for more tax relief
  • Simplified tax controls: thanks to electronic storage and indexing, it is easy to find and examine invoices at any time
  • Traceability of movements and payments: the use of electronic invoicing makes it possible to monitor the sending and receipt of documents, and to keep track of payments

The future of e-invoicing in the ASEAN region

E-invoicing is becoming one of the most strategic economic steps that many Asian governments are introducing. The driving force behind e-invoicing is certainly the various countries’ legislation and international regulations. However, there are obviously many business advantages, which make e-invoicing an opportunity and an important step for many companies towards digitization of their business processes, and investing in e-invoicing software is a great time to move your business to the next level.

Deploying an e-invoicing solution is, however, considerably complex. If issuing locally compliant invoices and complying with all e-invoicing requirements can be a cumbersome process, it is highly recommended to use the expertise of a service provider that can guarantee quality and reliability for your company and help you along your e-invoicing journey.

Author : Vincenzo Cirillo

Vincenzo Cirillo leads global EDI and E-Invoicing solutions at Comarch for Asian clients, drawing on his extensive experience in the supply chain and automotive industry in several countries. He has developed a passion for enabling digital business.

Journal Online
A collection of noteworthy information on various topics from the Philippines and the rest of the world.