E-Invoicing in Canada: A Study on Implementation

The CRA (Canada’s Revenue Agency)

While there is no mandate for e-invoicing in Canada, the Canadian government is actively exploring the advantages of electronic invoices and providing guidance on its implementation.

The Canada Revenue Agency (CRA) is responsible for enforcing taxation legislation. The CRA strongly encourages businesses to use electronic invoicing because of its many benefits. To ensure that businesses can confidently comply, the CRA has established comprehensive rules and regulations for all invoicing matters:

Storage: Processes should guarantee invoices’ confidentiality, integrity, and availability. They should also be easy to retrieve when needed.

Archiving: All invoices must be archived for a minimum of six years.

Format: E-invoices should follow the UBL model (XML based).

Billing Information: Information such as date, invoice number and clear description of the goods or services must be included. Additionally, businesses contact information and customer’s contact information.

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The CRA and Underground Economy

One main reason that the government is considering e-invoicing is to reduce activity in the underground economy (UE). The UE is an economic activity/transaction that is hidden from the government in order to avoid taxes and other obligations.

In 2021, the CRA launched an initiative to study the viability of a B2B e-invoicing mandate.

The main objective was to evaluate the potential benefits of e-invoicing for businesses. These benefits include increased efficiency, improved sales tax compliance, deterrence of participation in the underground economy, and improved taxpayer experience with e-invoicing. However, the study also provided insight on limitations to adopting electronic invoicing.

E-Invoicing Evaluation

The 2021 CRA study on e-invoicing identified key concerns that businesses have about using e-invoicing. These limitations include:

It is not being widely used - Participants in the study felt that if most of the companies they work with do not use e-invoicing.
Why fix something that isn't broken? Some companies do not see the benefit of moving to electronic invoicing because they are satisfied with their current invoicing processes.
Efficient Processing vs. Error Concerns - Although e-invoicing can streamline invoice processing, study participants expressed concern that automation could lead to undetected errors.

Those who participated in the CRA studies also shared their views on how Canadian businesses could be encouraged to adopt electronic invoicing.

Ideas ranged from a mandate for its use by the Canadian government, to larger companies leading the way for smaller ones. Additional incentives could include rebates or tax breaks from the Canada Revenue Agency for companies that adopt e-invoicing.

To summarize, this study has helped the government understand what adopting electronic invoicing could mean. It provided insight into how Canadian businesses view e-invoicing, identified pain points, and suggested ways in which the government could encourage its use in the coming years.

Why choose E-invoicing?

Many countries are adopting e-invoicing for its benefits, including faster payments, accessible documents, improved partner relationships, error-free tax filing, and more. The transition to e-invoicing has already begun in many countries, and it is only a matter of time before most businesses adopt this model.

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