The Compliance Network implementation process includes the following high-level phases:

The following roles interact with each other during the Compliance Network implementation process:

Professional Services (PS)

The PS team is responsible for advising the customer and guiding the Compliance Network solution for the customer. To start the implementation, PS meets with the customer to explain the Sovos implementation process.

Sales Engineers (SE)

SEs talk with the customer before they buy the Compliance Network solution to identify the customer's needs. Each SE provides a documented list of customer requirements to the PS implementation team. SEs advise customers to use the Sovos Canonical Invoice (SCI), which follows the UBL standard format.

Customers

Customers are responsible for the overall implementation within their environment and must work closely with Sovos or our partners to ensure success. For a successful implementation, the customer must assign a project manager to monitor and manage the project. This liaison helps to make sure that customer needs are met and involves additional customer team members throughout the process to validate requirements, perform testing, and provide feedback.

Each country has specific tax regulations and incorporates one or more of the following compliance models. For implementation purposes, these models drive what needs to be configured for each country.

Post-audit model

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.

There are no regulations governing electronic interactions in the post-audit model. However, requirements may exist for ensuring the authenticity and integrity of fiscal documents.

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 in most European countries, Canada, and parts of Asia 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. In the clearance model, the government validates transactions according to specific regulations before trading partners can interact. However, the government does not provide the connectivity between trading partners. Example: Latin America countries.

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 e-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.

Network

The network model is a variation of the clearance model. In addition to regulating transactions, the government also provides the network for connectivity between trading partners. This impacts how solutions are configured for sending and receiving documents. Example: Italy.

Interoperability

Unlike the clearance and network models, the government is not directly involved in the process. However, there is an expectation for interoperability, with the government encouraging the use of e-invoices. The most common framework in this model is PEPPOL. For more information about PEPPOL, see About PEPPOL.

Combination of clearance and interoperability

The combination model involves the government and provides a framework. There is also a network version of this model where the network must register everything with the government. Examples: France, Singapore, Germany.