Electronic Invoicing Models: CTC, Clearance, Real-Time, Centralized, Interoperable, and More…

Electronic invoicing has emerged as a vital tool for business management in the digital era. However, there is no universal model applied consistently across the globe. Different countries have adopted diverse approaches, customizing their electronic invoicing systems to meet their unique regulatory, economic, and technological requirements.

This variety of models reflects the different priorities and needs of each country, ranging from administrative simplification and reduction of tax fraud to improved operational efficiency and integration with emerging technologies. In this article, we will explore the diversity of these electronic invoicing models, examining how various countries are implementing their systems and the implications for businesses operating on an international scale.

Beyond their specific characteristics, two main data collection methods can be distinguished: Post-Audit and CTC (Continuous Transaction Controls).

Post-Audit Method

Post-audit electronic invoicing models are systems where invoices are sent directly from the issuer to the recipient without requiring prior approval from tax authorities. In other words, tax authorities do not intervene in the issuance and receipt of electronic documents in real-time but instead review the transactions later through audits.

Key Aspects of Post-Audit Models

• Direct Transmission: Electronic invoices are exchanged directly between the issuer and the recipient without passing through a government platform or intermediary at the time of issuance.
• Taxpayer Responsibility: Issuers and recipients of electronic invoices must ensure that their records comply with the legal and technical requirements set by the tax authority.
• Subsequent Audits: While post-audit models allow for greater operational agility, they require companies to maintain accurate and organized records to successfully handle subsequent audits. During these audits, it is verified that the invoices comply with tax rules and regulations and are correctly recorded in the companies' accounting systems.
• Operational Flexibility: This model offers companies greater flexibility and autonomy in managing their invoicing processes, as they are not dependent on immediate validation by tax authorities.
• Standards and Regulations: Although tax authorities do not intervene in real-time, they set standards and regulations that electronic invoices must comply with, both in terms of format and content.

CTC Method (Continuous Transaction Controls)

Control and oversight of transactions have become critical to ensuring compliance and operational efficiency. 

As a result, many countries are enacting mandatory electronic invoicing legislation and adopting the CTC model. In this system, electronic invoices must be sent in real-time to the national tax authority. This allows authorities to collect data on business activity in real-time, directly from the commercial transaction exchange processes or from company management systems.

This strategy addresses the inefficiencies associated with post-audit models, where retrospective audits provide information on transactions long after they have been completed. 

It not only enhances the transparency and accuracy of financial records but also enables companies to respond quickly to any issues, minimizing the risk of regulatory penalties and fines.
Within the Continuous Transaction Control method, there are several electronic invoicing models with differentiated processes.

Clearance Model CTC

The Clearance model requires validation or approval from the tax authority for each electronic invoice before it can be sent to the recipient. Invoices are transmitted in real-time to the government's national platform, which assigns unique identifiers and QR codes to each document.

This model ensures efficient and accurate tax information management, reducing the need for retroactive audits. It is widely used in most Latin American countries and has also been adopted in Saudi Arabia, Israel, and others.

In Mexico, electronic invoices, known as Comprobante Fiscal Digital por Internet (CFDI), have been mandatory for all taxpayers since 2014. The CFDI is issued in an XML format, enabling automated processing and data validation by the Tax Administration Service (SAT). Each electronic invoice includes a digital seal to ensure its authenticity and integrity.

In Saudi Arabia, electronic invoices must be sent to a central platform via API. The platform uses several security mechanisms, including electronic signatures, generating universally unique identifiers (UUID), creating hashes, and incorporating QR codes.

Interoperability Model and Peppol CTC

In the interoperability model, all fiscal information is sent in real-time through electronic invoice exchange service providers known as Access Points. These providers can agree on exchange formats, creating open networks with diverse formats and interoperable service providers.

A notable example is the Peppol model, where electronic invoices or documents are exchanged via Peppol Access Points using the Peppol BIS format based on UBL 2.1 or CII. In this setup, the seller sends the invoice to their access point, which then transmits the document to the buyer's access point, and finally to the recipient. This is referred to as the Peppol four-corner model.

Peppol is used in countries like Belgium, Australia, and Singapore. Taxpayers must send and receive structured electronic invoices through the Peppol network using the Peppol BIS standard.

The Peppol CTC model adds a central tax platform as a fifth key component in the network. The government platform serves as the fifth corner, creating a hybrid model that combines elements of existing CTC models with Peppol's infrastructure. In the four-corner model, documents are exchanged through Access Points. In the five-corner model, documents are also sent to the central tax platform, adding an extra layer to the document flow.

Centralized Model

In the centralized model, electronic invoices are sent in real-time to the national platform, which receives and processes the documents. This central platform is responsible for forwarding the document to the recipient.

This model is used in countries such as Italy, Poland, and Romania.

Italy's e-invoicing system, SdI, has set a benchmark in Europe by being the first EU country to widely implement it for both public and private sectors. Since 2014, electronic invoicing with public administrations, known as FatturaPA, has been mandatory, and since 2019, it has also been required for private companies.

In Romania, the issuance and reception of electronic invoices through the centralized e-Invoicing platform, RO E-Factura, is mandatory. Once the invoice is transmitted electronically, the platform assigns an identification number to the invoice.

Real-Time Reporting Model

The real-time reporting model involves sending the invoice to the tax authority in real-time, and then sending it to the recipient in an agreed-upon format. The national platform does not validate or forward the invoice to the recipient; it simply acts as a repository for the invoices.

There are several examples of this model being used for both electronic invoicing and electronic VAT reporting:

• The seller must report the required tax data to the tax authority almost in real-time or shortly after transactions: RTIR in Hungary.
• Periodic electronic reports on sales transactions: SII in Spain, SAF-T Billing in Portugal, and international B2B and B2C in France.
• E-Reporting with accounting information: monthly, annually, or on-demand: SAF-T in Poland, Norway, Lithuania, and E-Accounting in Portugal.

Decentralized Model

This model combines several processes from the previously mentioned models. Both certified service providers and the government’s central platform are involved. The company sends the electronic invoice to its certified service provider, who validates the document and then sends it to the central platform. Subsequently, the document exchange between companies also occurs through the service providers rather than the government’s centralized platform.

France and Spain are set to implement this decentralized e-invoicing model.

In France, the Public Billing Portal (PPF) will play a crucial role by centralizing all electronic invoices exchanged within the country. Companies in France will manage their electronic invoices through PDPs (Plataformes de Dématérialisation Partenaires).

These platforms act as third parties accredited by the DGFiP (Direction Générale des Finances Publiques) for validating invoices, sending them to the government hub (PPF or Portail Public de Facturation), and delivering them to the recipient through their respective PDPs.

EDICOM Solution: International E-Invoicing Platform

Global e-invoicing demands solutions that can handle its complexity. EDICOM’s e-invoicing platform facilitates and simplifies global tax compliance across B2G, B2B, and B2C sectors.

From a centralized environment, it allows the management of all processes related to the sending and receiving of electronic invoices, as well as other tax documents such as VAT reports, transport documents, or declarations required by tax authorities in the countries where a company operates.

EDICOM’s platform integrates with any ERP (SAP, Microsoft Dynamics, Sage, Oracle, etc.) to extract necessary data and create electronic invoices. It also enables communication with tax authorities in each country to ensure integration according to the defined e-invoicing model.

Our solution is designed to meet the specific legal requirements of over 80 countries. The e-invoicing platform automates the generation, sending, receiving, and storage of invoices, ensuring compliance with tax authorities and reducing the risk of errors and delays.