As a seller or buyer, how often do you check the correctness of invoices and initial documents? What should you pay attention to?
Let’s start with the fact that the accounting initial document is an exceptionally important proof confirming the occurrence of a business transaction. An accounting initial document is not always related to a purchase or sale, so it has a very broad scope. An invoice, however, only concerns purchase and sale transactions and is also an initial document.
Only a legal entity can issue a sales invoice. As a taxpayer, they are obliged to do so within 7 days when transferring goods or providing services. In case of advance payment, the invoice must be issued within 7 days of receipt. For intra-Community supply of goods or when providing services to a taxable person from another member state, the invoice must be issued by the 15th day of the month following the shipment or making the service available.
The Accounting Act, Commercial Code, and Consumer Protection Act require that an invoice must include:
1. Date of the economic transaction, i.e., the date of sale or service provision
2. Description of the economic content, i.e., name or description of goods or services
3. Quantity, unit price, and total amount paid for each good or service
4. Invoice number
5. Details of the parties involved: registration code (registry number), business name, address of the place of activity
For transactions involving VAT payers, additional requirements under the VAT Act include:
6. Date of invoice issuance (which may differ from the transaction date)
7. Registration numbers of seller and buyer as VAT payers
8. Date of receipt of partial or full payment for goods or services if different from invoice date
9. Price excluding VAT and any discounts if not included in the price
10. Taxable amount by VAT rates with applicable rates or total exempt turnover
11. VAT amount payable (except in cases specified by law). The VAT amount is marked in euros.
For certain transactions, it is additionally necessary to specify references either to relevant provisions in the VAT Act or to articles in the VAT Directive. References are necessary for example in cases of exempt turnover and zero-rated supplies, intra-Community transactions, and special schemes. A very convenient tool is a table available on the tax authority’s website listing references according to §37 section 8 of the VAT Act: https://www.emta.ee/…/tu…/kaibemaksuseaduse-selgitused/arved
There are also simplified invoices issued for example when providing passenger transport services or through payment terminals at parking meters or fuel pumps. A simplified invoice must at least include: date of issuance, name and registration number as a VAT payer, description of goods or services, taxable amount, and VAT payable.
The taxpayer issuing a simplified invoice must also mark their name and registration number on it.
All requirements for invoices are clear and written in black and white. So why do incorrect invoices cause so many misunderstandings and inconveniences for taxpayers?
Based on case law, the problem usually lies either in how the invoice is issued or in proving the transaction. Therefore, here are some additional tips to help mitigate risks related to invoices:
1. All mandatory details must be included.
2. In many cases, an invoice alone is not sufficient proof of a transaction; initial documents may include receipts, contracts, delivery notes, and bank statements.
3. Documentation proving receipt of services is often not maintained but helps substantiate claims.
4. Merely stating a general service name like “repair work” or “transport services” is insufficient; references to documents with detailed descriptions and figures should be included so that services can be identified and verified.
5. The date of transfer/delivery of goods or services is often missing—do not forget to include it.
The topic of initial documents is certainly one of the main themes for both accountants and auditors. We take it seriously daily and conduct ongoing checks on initial documents; however, sometimes it may already be too late—so it’s good if this matter is clarified at the company level as well.
