Common e-invoicing models

While each country has unique requirements, there are a few e-invoicing models that most countries use. Compliance Network can handle the following models, as well as deliver an easy upgrade path when a country shifts from one model to another, typically shifting from a basic post-audit to a more advanced CTC model.

Post-audit

The post-audit model requires trading partners to demonstrate the integrity of the content and the authenticity of the origin of their e-invoices from the time they are issued until the end of the mandatory storage period. For invoices issued in electronic format, this often means that some form of electronic signature or other approach must be applied to ensure long-term verifiable evidence.

In this system, the tax administration's audit occurs after the transaction rather than during the transaction, and the enforcement of VAT largely depends on periodic reports submitted by the taxpayer.

This model is used mostly in Europe and typically represents the first step towards one of the more comprehensive e-invoicing models listed below.

Continuous Transaction Controls (CTC)

CTC models build on the requirements of the post-audit model. Like post-audit, trading partners are typically required to verify integrity and authenticity through electronic signatures.

The key difference between these two models lies in the timing of the tax authorities' audits. While the post-audit model involves auditing after the transactions took place, CTC regimes integrate tax administration audits within the transaction process. In CTC models, the supplier sends transactional data in a prescribed format to the tax authorities or their authorized agents, either before or immediately after issuing the invoice to the customer, facilitating real-time monitoring.

CTC models are mostly used in Latin America and are gaining traction in Europe with the introduction of CTC requirements in countries such as Italy, Spain, Hungary, Poland, and France.

CTC Clearance

A CTC variant characterized by the issuance of electronic invoices in a prescribed format. An integral part of this process is obtaining a clearance or confirmation token such as an electronic signature or a unique reference from the tax administration. This token is a prerequisite for the issuance (real-time clearance) or subsequent tax validity (deferred clearance) of the invoice. In addition, this tax validity may be implied by the CTC platform's transmission of a commercial document to the counterparty of the trading partner that sent the document to the CTC platform.

CTC E-reporting

Many countries, especially in Europe, are moving towards CTC not by imposing a CTC clearance regime, but by enhancing the granularity and frequency of existing VAT reporting processes via CTC reporting. From a purely technical perspective, CTC reporting often looks like CTC clearance, where businesses send transactional data to the tax authority. However, in a CTC reporting regime, the taxpayer doesn't have to wait for an explicit approval or token from the CTC platform before further processing a document as a valid invoice for tax purposes.

PEPPOL model

PEPPOL is an open standard, most used in Europe and Asia, that aims to simplify the way private sector businesses and public entities send and receive invoices.

The PEPPOL model takes CTC regimes one step further by standardizing the e-invoice exchange mechanism itself. In this model, countries opt out of a centralized exchange model and instead establish rules for network interoperability. These rules frequently follow or outright mandate the use of the PEPPOL methodology

The PEPPOL methodology is a set of standards, services, and rules managed by the open PEPPOL Association. As it is based on access points that act as interoperable brokers for taxpayers, this methodology is known as the "four-corner-model". A next step in the evolution of such regulated network models is the "five-corner model", in which access points perform CTC reporting or clearance operations with the tax administration.

As a certified PEPPOL access point, Sovos can send and receive documents to and from governments via the PEPPOL network.

Networks

While PEPPOL is aimed at public procurement as well as business-to-government (B2G) e-invoicing and simplification, many countries extend it to cover all tax-paying businesses. Sometimes, this results in country-specific networks.

Networks define standard systems, processes, and interoperability requirements and often additional reporting requirements for B2B and B2C transactions. In France, for example, the Partner Dematerialization Platform (PDP) is a regulated network. These networks are authorized by the government and require a strict vetting process to ensure that they meet certain requirements. There are defined connection points, interoperability requirements, and additional reporting requirements for cross-border invoices.