The European Union (EU) is undergoing a digital transformation in the way businesses handle invoicing. As of 2025, new mandates are accelerating the adoption of electronic invoicing (e-invoicing) across the continent, impacting both public and private sectors. Latvia, as an EU Member State, is at the forefront of this shift, with regulatory changes poised to substantially influence the managerial and financial operations of businesses. Read more about the impact of these changes on management and financial accounting processes in an article by Baker Tilly Baltics partner Toms Zirdziņš.
The European E-Invoicing Landscape
Policy Evolution and Regulatory Framework
The EU’s push for e-invoicing is rooted in broader digitalization strategies and VAT reform policies, notably through the "VAT in the Digital Age" (ViDA) initiative.
In 2025, Member States gained the freedom to impose mandatory e-invoicing for both B2B and B2C transactions without special approval from the European Commission, thanks to amendments in the VAT Directive.
This regulatory flexibility is fostering swift e-invoicing adoption throughout the Single Market, establishing structured, machine-readable invoices - aligned with the EN 16931 European standard - as the norm for inter-business and business-to-government communication.
By July 1, 2030, intra-EU B2B e-invoicing will become officially mandatory, ultimately phasing out paper invoices and outdated digital formats (such as PDFs that lack structure for automation). However, national mandates are emerging in advance, and 2025 sees significant milestones in many countries, including Germany, France, Romania, Estonia, and Latvia.
Latvia's E-Invoicing Transition: Key Regulatory Changes
Latvia stands as one of the first Baltic countries to roll out a comprehensive e-invoicing mandate:
- From January 1, 2025: E-invoicing becomes compulsory for business-to-government (B2G) transactions. Every company supplying goods or services to government entities must issue invoices in structured electronic formats, following legislation amendments set in the Accounting Law.
- From January 1, 2026: The mandate is set to extend to all business-to-business (B2B) transactions between Latvian-registered entities, with invoices sent in real-time to the State Revenue Service (VID), though a phased approach means certain requirements may be postponed to January 1, 2028.
Structured invoices must comply with the European XML standard (EN 16931) and be transmitted via certified national platforms, like Latvija.gov.lv, PEPPOL, or eAddress.
Scope and Coverage:
- The legal amendments cover all Latvian-registered businesses, branches, associations, and foundations.
- Exemptions exist for very limited transaction types, including select small-value or non-taxable invoices. The requirement covers both sales and procurement sides, meaning that businesses must be capable of sending and receiving compliant e-invoices.
Managerial Perspective: Impact and Response
The shift to e-invoicing is more than a compliance issue - it's a strategic managerial decision that affects financial stewardship, transparency, and digital competitiveness. Senior management must treat e-invoicing implementation as a top-down project, allocating resources for technology upgrades, process redesign, and staff training.
Key managerial responsibilities include:
- Auditing and updating internal systems for compatibility with EN 16931 and PEPPOL protocols.
- Selecting and integrating ERP or invoicing software that meets regulatory standards.
- Coordinating with IT, finance, and operations teams to ensure smooth data interchange.
- Revising internal controls, documentation, and data storage protocols for electronic records management.
Change Management
Transitioning to e-invoicing demands a change management mindset. Employees require training to adapt to new workflows, digital tools, and regulatory reporting requirements. Cross-functional teams (involving finance, IT, compliance, and procurement) must collaborate to ensure seamless operations during the switchover.
Direct and Indirect Cost Savings
Adopting e-invoicing offers substantial financial benefits:
- Cost Reduction: The European Commission estimates that exchanging structured e-invoices saves businesses EUR 5–8 per invoice compared to traditional/manual processes, owing to reduced printing, postage, administrative handling, and error correction.
- Operational Efficiency: Automated invoicing speeds up invoice generation, delivery, and reconciliation, cutting billing cycle times and freeing up working capital.
- Faster Cash Flow: E-invoicing’s transparency and real-time verification reduce payment delays and speed up collections, a major advantage in managing liquidity.
Enhanced Compliance and Risk Management
Real-time reporting to authorities, automatic validation, and embedded audit trails greatly reduce VAT fraud, invoice duplication, and compliance risks. The transition reduces the costs and time involved in VAT reporting, as required data can be compiled automatically from e-invoices.
Scalability and Business Growth
Modern e-invoicing platforms integrate seamlessly with ERP and accounting solutions, supporting scalability and international expansion—critical for SMEs and cross-border traders. Standardized formats facilitate easier trade within Europe, helping Latvian businesses participate more effectively in the Single Market.
Penalties for Non-Compliance
Authorities may impose administrative fines for non-compliance or delays in switching to structured e-invoices, and failure to comply could result in payment rejections by public entities or business partners.
Practical Steps for a Successful Transition
Assess Current Invoicing Systems:
- Determine the gap between existing invoicing practices and e-invoicing requirements.
- Select and Implement Compliant Software: Choose a PEPPOL- and EN 16931-compliant solution. Ensure it allows for direct transmission to Latvian public portals and the State Revenue Service.
- Integrate with ERP Systems: Streamline workflows and automate data entry, accounting processes, and reporting.
- Employee Training: Invest in upskilling staff on e-invoicing procedures, regulatory standards, and new software tools.
- Update Data Governance Protocols: Ensure secure electronic archiving, data privacy, and compliance with Latvian regulatory requirements.
- Engage Suppliers and Customers: Proactively communicate changes and coordinate timelines for adopting new formats and communication channels.
Conclusions
E-invoicing in Europe, and specifically in Latvia, is no longer a distant regulatory aspiration but an immediate business reality. With the 2025 (B2G) and 2026 (B2B) mandates, organizations must embed digital invoicing into their operations not only to ensure compliance but also to leverage the managerial and financial benefits it offers.
Business leaders in Latvia have a brief but critical window to prepare. By acting now - auditing systems, training teams, and upgrading digital infrastructure - they can turn regulatory compliance into a springboard for operational excellence, financial efficiency, and growth. The future of finance in Latvia is digital, and proactive adaptation will transform e-invoicing from a legal obligation into a source of competitive advantage.
To receive individual consultation on this or any other relevant issue, contact Baker Tilly Baltics partner Toms Zirdzins - an accounting outsourcing expert.
Sources:
https://edicomgroup.com/blog/vida-the-european-union-promotes-b2b-electronic-invoicing
https://www.amexiogroup.com/2025/05/16/8-benefits-of-electronic-invoicing/
https://finbite.eu/en/latvia-e-invoicing/
https://www.melasoft.com/post/e-invoicing-in-latvia-what-s-changing-and-how-businesses-can-prepare
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