E-invoicing in Estonia and the European Union

In the field of accounting, various technologies and programmes are increasingly making inroads to help accountants in their daily tasks. In step with such developments, the transmission and management of e-invoices have once again become a hot topic in Estonia. Since 2019, public sector companies have switched to sending and receiving only e-invoices. Unfortunately, similar activity for the adoption of e-invoices has not yet been seen in the private sector.

Since the implementation of the e-invoice directive 2014/55/EU in April 2020, all public administrations across the European Union (EU) have been following the European standard for e-invoices.

What is an e-invoice?

The peculiarity of an e-invoice lies in its fixed standard, and it is sent to the recipient with a specific structure (as an XML file) directly into their accounting software. This means that e-invoices are neither sent nor received via email. The handling of e-invoices is faster because an e-invoice is machine-readable, meaning it reads the data directly into the accounting software. Such a process reduces the number of human errors in invoice entry, and the automatic movement of information saves significant time for both the sender and the recipient of the invoice. Additionally, an e-invoice is a secure way to send an invoice, as it moves directly from the sender's accounting software to the recipient's without getting lost in email spam, and an electronic trace (log) remains from the sending process. The accountant still has the option to change the details of the e-invoice if necessary - for example, the accounts in the chart of accounts where the invoice is placed in the accounting software - i.e. the e-invoice simplifies accounting and eliminates manual data entry but does not impose any rigid processes resulting from the invoice.

The sending of e-invoices is used in several European countries (Norway, Finland, and Denmark) or is even mandatory. The growth in the sending of e-invoices shows that the proportion of e-invoices in invoicing is likely to become the norm in the future, so it would be beneficial to adopt it sooner rather than later.

The future of e-invoices in Estonia

On October 2^nd, 2024, the draft bill No. 428 SE for amending the Accounting Act was announced , which will come into force on 1 July 2025.

The objective of the draft bill is to promote the implementation of a unified European standard for e-invoices and support the full adoption of digital invoicing not only in the public sector but also in the private sector. Therefore, it is reasonable to make the procedure for registering as an e-invoice recipient more open and to allow it to be initiated by the entrepreneur themselves. According to current law, registration in the commercial register is initiated by an e-invoice handler operating in Estonia (often referred to as an 'e-invoice operator').

To ensure pan-European capability for receiving and sending e-invoices, it is essential to implement the European e-invoice standard (standard EN 16931). The European e-invoice standard helps to send and receive e-invoices more easily to and from foreign countries and to participate in the single European digital market. The obligation to use the European e-invoice standard exists by default if the buyer requires the seller to submit an e-invoice and the parties have not agreed on another format. The draft bill does not prohibit the continued use of any existing invoice format, including the Estonian e-invoice standard EVS 923:2014.

It is worth noting that different e-invoice formats are used in different countries, and to move invoices and data automatically between countries, the pan-European Peppol network must be used. The Peppol environment (Pan-European Public Procurement On-Line) is created for the international exchange of electronic documents. Essentially, the Peppol environment translates a locally formatted e-invoice into a document that complies with the European Union e-invoice standard. To send and receive invoices through the Peppol channel, the Peppol channel must be activated with a local e-invoice operator.

The main benefits associated with transitioning to the European e-invoice standard are as follows:

• Cross-border invoicing can be made machine-readable;
• It is not necessary to implement all EU formats independently to achieve EU support;
• Easier participation in EU public procurements;
• More machine-readable information – commercial invoices, more attachments, more additional information -> greater support for business processes;
• Better standardisation even in the context of the Estonian e-invoice -> better conditions for the spread of e-invoicing.

The obligation to use e-invoices and changes to be introduced with the bill No. 428 SE from July 1^st, 2025

The extent of the e-invoice submission obligation is fixed in the current law as a general obligation for all accounting entities – they are required to submit an e-invoice if the buyer is a public sector entity. With this amendment, the regulation is reversed compared to the current one: it is defined not as the seller's obligation to submit an e-invoice to certain buyers, but as the buyer's right to demand an e-invoice from the seller. This right extends to all accounting entities who have registered themselves as e-invoice recipients in the e-business register. This includes all public sector accounting entities.

Example 1

A public sector company purchases from a private sector company

The obligation to issue an e-invoice to the public sector has been in place since 2019 in Estonia. According to the adopted draft bill, the wording is reversed, and all public sector companies still have the right to demand the issuance of an e-invoice from the seller through the appropriate software.

A private sector company purchases from a public sector company

If the private sector company, i.e., the buyer, has not specified in the Commercial Register that it is an e-invoice recipient, then the public sector company is not obligated to issue an e-invoice.

Example 2

A private sector company purchases from another private sector company.

If the buyer is registered in the Commercial Register as an e-invoice recipient, then it has the right to demand an e-invoice from the seller in the private sector. If the e-invoice format has not been specifically agreed upon, the European standard applies by default. When sending e-invoices, it should be ensured that the software in use allows for the transmission of the corresponding e-invoice.

Example 3

An Estonian private sector company purchases from a foreign company

If an Estonian company, which receives e-invoices, purchases services/goods from a foreign company, the foreign supplier also needs to send an e-invoice to the Estonian company. If the e-invoice format has not been specifically agreed upon, the European standard applies by default. If the foreign supplier is unable to transmit the e-invoice from the software they use, they should use the Peppol environment.