They say, for every law, there’s a loophole, and in e-invoicing this statement applies exactly. false invoices are a reality. These are documents that do not comply with the regulations of each region or country. The fact is that these fraudulent documents are much more common than we think, and knowing how to detect them is fundamental to avoid problems and penalties. Therefore, in this article, we address the sensitive topic of false invoicing.
What are false invoices?
By definition, we consider false invoices as the accounting documents issued with the intention of deceiving tax authorities and obtaining illicit benefits. They can be generated to simulate taxes that were never incurred or to inflate the value of a real transaction.
Thus, false invoices allow the issuing company to deduct something it never paid or to claim undue refunds. As for their uses, they are typically used for the following purposes:
- Tax evasion
- Money laundering
- Funding illegal activities
- Committing fraud against the corresponding tax authorities
As you will understand, false invoices constitute a serious crime, regardless of the tax residence and the operating location of the issuing company. Although legislation varies from region to region, companies that issue false invoices can face civil and criminal penalties, as you will see later.
How to detect them at first glance? Key differences from a legitimate one
Therefore, if you have any suspicion that false invoices are being issued, either within your company or by a supplier or client, you must report it. It is the only way for tax authorities to take the necessary measures to prevent tax fraud. Now, how to detect them?
Identifying a fake invoice is not easy. Or, at least, some of them. It is true that there are various types of invoicesfor which it is stipulated what information they must include. Nevertheless, there are true specialists in generating fake invoices. Even so, there are indicators that help detect them,such as:
- The contact details.Fake invoices often contain incomplete or incorrect contact information. Verify if the phone number or email address is real.
- The company details.Check if the company issuing the invoice is legitimate by investigating whether it exists, if it has a website, if there is public information about it…
- Tax identification numbers.Investigate whether the tax identification numbers of the issuer and receiver are correct and valid in the public records of the corresponding tax authority.
- The transaction details.Ensure that the transaction details on the invoice are accurate and consistent, and that the prices and quantities are as well.
In any case, the Government publicly offers the requirementsthat invoices, electronic or conventional, must meet.
What happens if I receive a fake invoice?
If any of the issues we cited in the previous section don’t add up, you might be dealing with a fake invoice. In that case, you should proceed as follows:
- Verify the authenticity of the invoice.To clear up doubts and suspicions that an invoice is fake, you must first verify its authenticity yourself. To do this, you can contact the issuer and confirm the details of the operation as we have instructed you.
- Document the situation.Yes, if that invoice is indeed fake, you must document everything related to it. This means you need to record the reception date, the sender’s company name and contact details, the amounts it includes, and any other information that might be useful in the investigation.
- Inform the tax authorities.Once you have confirmed that it is fake, inform the tax authorities. They will investigate the matter and take the necessary measures to prevent or penalize fraud. Additionally, by reporting the incident, you will avoid tax and administrative problems.
- Take legal action.If the fake invoice impacts your accounting or taxation, take the legal measures you deem appropriate to claim compensation or to reconcile your invoicing.
In conclusion, when faced with a fake invoice, it is important to take immediate action. This is the best way to protect your company and avoid any negative consequences.
How does the Tax Agency check invoices?
However, even though we have discussed how you can detect it, tax authorities are also responsible for pursuing and combating false invoicing. We are referring to the AEAT (Spanish Tax Agency), provincial councils, and other tax bodies.
These institutions have their own procedures for studying the invoices of thousands of companies. Likewise, for example, the Spanish Tax Agency checks invoicing processes using the following tools:
- Verification of information in tax returns.The Tax Agency verifies the information in the submitted tax returns to check if the invoices correspond to actual transactions.
- Analysis of financial information.The Tax Agency uses financial analysis techniques to identify suspicious patterns and behaviors that may indicate the existence of fraudulent invoices or activities.
- AuditsThe Tax Agency conducts online and/or in-person audits of companies to verify the authenticity of their invoices.
- Information exchange with agencies from other countries.This agency can also exchange information with tax agencies from other countries to identify illegal transactions.
All are legal and legitimate mechanisms that help both the Tax Agency and regional tax authorities detect fraudulent documents.
Penalties for issuing false invoices
Furthermore, to penalize the forgery of invoices, the legislation of each country establishes its own penalties. In general, fraudulent invoicing is considered a serious offense and can lead to civil and criminal penalties, including financial fines, imprisonment, confiscation of assets, and loss of business license.
In Spain, for example, the issuing of false invoices is considered a tax offense and is codified in the Penal Code. Penalties can vary depending on the seriousness of the offense. However, there are fines of up to 150% of the defrauded amount, prison sentences of up to 6 years, and the inability to access public aid or tax benefits for a determined period of time.
In addition to criminal and administrative penalties, the issuing of false invoices can also have negative consequences for the company’s reputation. Most notably, it will damage the company’s image regarding integrity and honesty in the eyes of clients, suppliers, and the tax authorities themselves.
How to validate an invoice?
In turn, validate an invoice is another useful mechanism to avoid problems with erroneous or false invoicing. To do this, you must verify that the invoice complies with all legal and tax requirements by checking the following elements:
- The identification of the issuer and recipient, including their names and tax identification numbers.
- The details of the transaction, such as the issue date, invoice number, description of goods or services, quantity, and price.
- Applicable taxes, such as the tax rate and the corresponding tax amount.
- The format, which must be that established by the tax authorities.
- The signature of the issuer and/or recipient, as appropriate.
Once these aspects have been checked on any of your invoices, you can consider it valid and proceed with its management and storage. Furthermore, you can easily do this with a automatic accounting software like easyap’s.
Why are electronic invoices more secure than paper invoices?
Separately, in the fight against false invoicing, there is a new factor that helps combat them. We are talking about the digital world and the technologies it offers us. The easyap software is the best example, as with it you can generate your electronic invoices complying with all legal requirements.
In fact, the electronic invoices are more secure than paper invoices. Therefore, in multiple countries, they have already been established as mandatory, including Spain. Likewise, they have several characteristics that make them more reliable, such as:
- Authenticity. Electronic invoicing systems like ours have authenticity mechanisms that ensure the invoice has not been altered and comes from a legitimate issuer.
- Integrity. Online invoices cannot be altered without leaving a trace.
- Confidentiality. These types of invoices can be encrypted to protect confidential information about clients and suppliers.
- Record-keeping. Electronic invoices are recorded and stored in secure systems, providing easy access to information and greater transparency.
- Reduction of errors. Electronic invoices reduce the possibility of human errors, as information is processed automatically.
Ultimately, electronic invoices are more secure than paper invoices because they feature more sophisticated security mechanisms. Additionally, the digitalization of transactions offers you greater invoicing efficiency.
All of this is what our reliable easyap software provides. However, the advantages and functionalities go much further: tax reporting, employee expense management, supplier portal… If you want to know more, you just have to contact us.
Frequently Asked Questions
How to tell if an invoice is fake in Spain?
Unfortunately, there’s no magic formula to verify authenticity in Spain, but that doesn’t mean it’s impossible. You need to perform checks to find flaws that expose falseness, such as missing data, numbering errors, exaggerated amounts, or lack of supporting documents.
