Electronic Invoicing in Construction: Subcontracting, VAT Reverse Charge and Work Progress Statements

Why the Construction Sector Is Distinct in the Electronic Invoicing Reform

Since the implementation timeline for large enterprises came into effect in September 2026, electronic invoicing is progressively becoming mandatory across the entire French economic landscape. However, the construction and public works (BTP) sector has specific characteristics that make it one of the most complex cases to address. Between multi-level subcontracting chains, monthly work progress statements, VAT reverse charge, and public procurement subject to specific rules, construction companies must reconcile regulatory compliance with the practical realities of job sites.

According to the French Federation of Building and Public Works (FFB), more than 60% of construction projects involve at least one subcontractor. In this context, every invoicing flow—whether it flows from subcontractor to main contractor or from the main contractor to the project owner—must now pass through a certified Partner Dematerialization Platform (PDP) or the Public Invoicing Portal (PPF). Understanding the rules applicable at each level is therefore a priority to avoid tax disputes and payment blocks.

The Obligation Timeline for Construction Companies

The timeline established by Ordinance No. 2021-1190 of September 15, 2021, and clarified by the 2024 Finance Act applies to construction companies according to their size:

• Large enterprises and mid-caps (ETI): obligation to issue and receive electronic invoices as of September 2026.
• SMEs and micro-enterprises (TPE): deferred emission obligation, but mandatory reception as of September 2026. These companies must therefore be capable of receiving electronic invoices in structured format (Factur-X, UBL, or CII) even if they are not yet required to issue them.

For subcontractors, often craft-based micro-enterprises, this reception obligation is immediate and concrete: they must equip themselves with a compatible solution to avoid blocking their client's workflows.

Accepted Electronic Invoice Formats in Construction

Construction can use the three structured formats accepted by the authorities:

• Factur-X: a hybrid Franco-German format (enriched PDF with an embedded XML file). This is often the most accessible option for construction SMEs. You can consult our complete guide to the Factur-X format to understand the required compliance levels.
• UBL 2.1 (Universal Business Language): an international standard, particularly used in public procurement through Chorus Pro.
• UN/CEFACT CII (Cross Industry Invoice): a pure structured format designed for complex B2B exchanges.

The choice of format must be coordinated with the main contractor or project owner before work begins.

VAT Reverse Charge in Construction Subcontracting: Mechanism and Impact on Electronic Invoicing

VAT reverse charge is at the heart of relationships between main contractors and subcontractors in the construction sector. This mechanism, provided for under Article 283, 2 nonies of the French General Tax Code (CGI), requires that VAT on construction work performed by a subcontractor not be collected by the subcontractor but instead paid directly by the main contractor (or the taxable recipient).

How VAT Reverse Charge Modifies the Structure of the Electronic Invoice

In this arrangement, the invoice issued by the subcontractor must not show VAT. It must obligatorily include:

• The legal notice: "Reverse charge — Article 283-2 nonies of the CGI"
• The applicable VAT rate (even if the amount is zero on the invoice)
• The nature of the work and its connection to the job site
• References to the subcontracting agreement and the project owner's acceptance

Under structured electronic invoicing, this information must be encoded in the corresponding XML fields. The VAT reason code AE (Reverse Charge) must appear in the `TaxCategory` node of the structured file. Any omission or error in this encoding can result in automatic rejection of the invoice by the recipient's PDP or even a tax audit.

It is strongly recommended to test your files with a free Factur-X validator before going into production.

Enhanced Reporting Obligations through e-Reporting

VAT reverse charge in subcontracting creates obligations to transmit information to the tax authorities through the e-reporting mechanism. The main contractor who applies the reverse charge must declare this transaction in their VAT return (CA3) and, where applicable, transmit transaction data to the authorities through their PDP. This dual traceability—in the structured invoice and in the e-reporting flow—represents a major novelty for the construction sector, which has been accustomed to more manual reporting practices.

Work Progress Statements: A Construction-Specific Feature and Electronic Processing

A work progress statement is a document unique to the construction industry. It is a periodic statement of progress (typically monthly) that documents the work completed, determines the amount due for the period, and serves as a request for interim payment. While not a classic accounting invoice, its treatment is crucial within the electronic invoicing reform framework.

Work Progress Statements and Electronic Invoicing: How Do They Relate?

According to the Directorate General of Public Finances (DGFiP), a work progress statement can be treated as a periodic invoice provided it meets the criteria defined in Article 289 of the CGI: identification of the parties, description of services, net amount, VAT rate and amount (or notation of reverse charge), date, and sequential number.

In construction practice, this means that each monthly statement issued by a subcontractor to the main contractor must:

1. Be issued in structured format (Factur-X, UBL, or CII) through a PDP.
2. Include the reverse charge notation if the subcontractor is subject to the mechanism under Article 283-2 nonies.
3. Be accompanied by the final account (DGD) at the end of the project, which settles all interim statements.

Handling Retention Amounts in Construction Electronic Invoices

The law of July 16, 1971, No. 71-584 authorizes the project owner to retain 5% of the amount of each work progress statement as security for proper performance. This retention must appear clearly in the electronic invoice.

In Factur-X format, the retention amount is encoded in the deduction elements (`AllowanceCharge` with a deduction-type indicator). Omitting this encoding in the XML file—even if the surface PDF is correct—constitutes a non-compliance that may trigger rejection by the client's PDP. Construction accounting software publishers (EBP, Sage, Chorus Pro) are progressively integrating these fields, but human verification remains essential during the transition phase.

Choosing Your PDP and Tools: Specific Issues for Construction Companies

The choice of a Partner Dematerialization Platform is a strategic decision for any construction company. Unlike other sectors, construction companies often manage multiple projects simultaneously, with multi-level invoicing flows (project owner → main contractor → subcontractors → sub-subcontractors).

Selection Criteria for a PDP Suited to Construction

For a construction company, the differentiating criteria are as follows:

• Native handling of construction work codes: the PDP must allow entry of NACR codes (Construction Activity Nomenclature) in structured invoices.
• Support for VAT reverse charge: the PDP must automatically manage construction-specific VAT rules (10% reduced rate for renovation, reverse charge, 20% VAT).
• ERP/construction accounting connectors: interoperability with software such as Sage 100 Construction, EBP Bâtiment, or Onaya is essential.
• Archiving with probative value: job site documents must be retained for 10 years under the Civil Code (ten-year warranty). The PDP must offer archiving compliant with standard NF Z42-013.

For craft-based micro-enterprises, the free Factur-X electronic invoice generator can be a first step before migrating to a complete solution.

Integration of Electronic Signature in Construction Workflows

The electronic invoicing reform should not be separated from electronic signature, which secures the entire document chain on a project site: subcontracting agreements, work orders, change orders, acceptance reports. The legal validity of electronic signature is fully recognized for these documents as long as it complies with the eIDAS regulation. In construction, where disputes over work performance are frequent, qualified electronic signature provides irrefutable proof of acceptance of contractual conditions.

Legal Framework Applicable to Electronic Invoicing in Construction

Compliance with electronic invoicing in the construction sector rests on a complex set of legislative and regulatory texts that must be mastered.

French General Tax Code (CGI)

• Article 289: defines mandatory statements on any invoice issued by a VAT-taxable person, now applicable to structured electronic invoices.
• Article 283, 2 nonies: institutes the VAT reverse charge mechanism for construction work performed by subcontractors. The taxable recipient is liable for VAT in place of the subcontractor.
• Article 289 bis: sets conditions for resorting to electronic invoicing and accepted formats.

Ordinance No. 2021-1190 of September 15, 2021: empowers the government to generalize electronic invoicing between VAT-taxable persons. Clarified by Decree No. 2022-1299 of October 7, 2022.

2024 Finance Act (Article 91): adjusts the deployment timeline and confirms universal reception obligation as of September 2026.

Law No. 71-584 of July 16, 1971: governs the 5% retention amount applicable to private works contracts. Its application in structured electronic invoices must comply with dedicated XML fields.

eIDAS Regulation No. 910/2014 and eIDAS 2.0 (EU Regulation 2024/1183): govern electronic signature and electronic seals used to authenticate invoices. Qualified signatures (QES) provide the absolute presumption of integrity required for probative archiving.

VAT Directive 2006/112/EC as amended: harmonizes VAT reverse charge rules at the European level in fraud-risk sectors, including construction. Article 199 of the directive grounds Article 283-2 nonies of the French CGI.

ETSI Standard EN 319 132: defines the profiles for advanced signature XAdES, CAdES, and PAdES, applicable to electronic invoice formats to ensure their integrity and non-repudiation over time.

GDPR No. 2016/679: personal data contained in invoices (signer name, company contact information) must be processed and archived in compliance with the GDPR, with storage limited to strict legal and accounting requirements.

Risks of Non-Compliance: an invoice not issued in the required format can be rejected by the recipient, leading to payment delays and exposing the issuer to a tax penalty of €15 per non-compliant invoice (capped at €15,000 per fiscal year for issuers, under Article 1737 of the CGI). For construction subcontractors, an error in encoding VAT reverse charge can trigger a VAT adjustment at the main contractor's expense, with surcharges ranging from 10% to 40% depending on the nature of the failure.

Use Cases: Electronic Invoicing in Construction in Practice

Scenario 1 — A Mid-Cap Civil Engineering Company with Multiple Subcontracting Levels

A public works company generating approximately €80 million in annual revenue acts as the main contractor on road projects for local authorities. It engages about twenty specialized subcontractors (earthwork, signage, asphalt) of which most are SMEs with fewer than 50 employees.

Before the reform, monthly work progress statements were handled via non-structured PDFs and paper purchase orders. Since September 2026, the mid-cap has been subject to the emission obligation. It deployed a PDP connected to its construction ERP to issue invoices to public sector clients (via Chorus Pro) and private clients. It also contractually required its subcontractors to equip themselves with a compatible solution for submitting monthly statements in Factur-X.

Result after 4 months of rollout: 35% reduction in work statement validation time (from 12 days to 8 days on average), elimination of disputes related to VAT errors (reverse charge automatically encoded by the ERP), and estimated savings of 1,200 accounting entry hours annually.

Scenario 2 — A Craft Electrician Subcontractor Facing Reception Requirements

A craft electrical company with 8 employees works exclusively as a subcontractor for two regional general contractors. Its annual revenue is €900,000 net, composed entirely of work subject to VAT reverse charge.

Although its emission obligation is deferred (micro-enterprise), it has been subject to reception requirements since September 2026. Its clients now issue work orders and purchase orders in structured format. The electrical contractor subscribed to a lightweight SaaS electronic invoicing solution (approximately €30/month) allowing it to:

• Receive and archive incoming flows from its clients.
• Generate its own monthly statements in Factur-X with pre-configured VAT reverse charge.
• Automatically transmit data to its accountant.

Estimated time savings of 3 to 4 hours per month on invoicing, with near-total elimination of VAT errors.

Scenario 3 — A Real Estate Developer Coordinating a Construction Site

A real estate developer managing annually 5 to 8 new construction projects (residential buildings) coordinates on average 30 participating companies per job site. It is the project owner and, as such, must receive electronic invoices from all its general contractors, who themselves receive statements from their subcontractors.

The developer deployed a PDP with a work contract management module that automatically reconciles each received invoice with the original contract, verifies compliance of the retention amount (5%), and detects attempts to invoice outside the contractual scope. It reduced its disputed payment instances by 40% in 6 months thanks to the automatic traceability of flows.

Conclusion

The electronic invoicing reform represents a pivotal turning point for the construction sector. Between VAT reverse charge, work progress statement management, retention amounts, and multi-level subcontracting chains, construction companies face one of the most demanding compliance transitions of this reform. Anticipating now—by choosing an appropriate PDP, training accounting teams, and imposing standards on subcontractors—is the only way to avoid invoice rejections and costly tax disputes.

Certyneo supports construction companies in their transition to compliant electronic invoicing, combining qualified electronic signature, Factur-X generation, and archiving with probative value. Discover our offerings and get started without obligation by reviewing our pricing or by testing our compliance assessment.