Ensuring e-invoicing compliance efficiency with Tradeshift (2 of 3)

June 22, 2021


In the first part of our 3 part series, we discussed the specifics of e-invoicing compliance and its definitions. Next, we take things one step further. In this article, we’ll break down the important aspects and terms of e-invoicing compliance that you and your coworkers need to know to ensure compliance and efficiency.

The 4 aspects of e-invoicing compliance:

When you break it down, e-invoicing compliance is concerned with 4 aspects:

    1. Authenticity of origin — this term means that the supplier’s identity or the issuer of the invoice has been affirmed.

    2. The integrity of content — integrity of content means that the required content on the invoice has not been altered or adjusted in any way after its issuance.

    3. Readability — readability is fairly straightforward; this means that the invoice is able to be read and comprehended by an individual.

    4. Compliant storage of e-documents — when it comes to e-invoicing, accurately handling and storing records and documents is crucial to maintain compliance.

Often, authenticity of origin and the integrity of content can be guaranteed through one of the 3 common practices:

    • Electronic Data Interchange (EDI) — this method requires a structured file format and regular reports.

    • Use of e-signature/digital signature — this method requires a qualified e-signature/digital signature affixed on the supplier side.  The buyer-side service then validates the e-signature/digital signature upon receipt.

    • Audit trail — this requires an audit trail of documentation on tasks and controls.

Each of these methods has its own rules and requirements, and our Tradeshift platform offers features that support EDI and e-signature/digital signature methods. In most cases, EDI is the default method utilized by Tradeshift when e-signatures are not required. In countries where e-signatures are required, our partnership with Sovos enables us to provide e-signatures/digital signatures and digital qualified time stamps. Through “signature validation proof,” we can help to strengthen the validity of electronic signatures.

Generally, the authenticity of origin should be addressed with a combination of business controls and technical controls. The integrity of content, on the other hand, can be ensured using only technical controls. The following sections will describe how the Tradeshift Pay solution offers and supports different controls to facilitate a customer’s e-invoicing compliance.

Authenticity of origin

When it comes to validating the authenticity of origin, the key lies in the business controls you put in place. Our Tradeshift Pay solution and team of experts help customers to establish the necessary controls for their own organizations in the following ways:

  • Tradeshift document validations — document validations are configured individually for each customer. These are used to confirm that all required fields and information is included in inbound documents. When organizations make certain information mandatory, authenticity can be addressed. For example, a basic business control to establish authenticity of origin requires a purchase order number on inbound invoices.

  • Tradeshift connection model — to take full advantage of the Tradeshift services, buyers and suppliers need to connect and collaborate. Part of this collaboration means that buyers and suppliers must accept and agree to the connection on our Tradeshift network. During this step, a buyer can put business controls in place to prevent unvalidated suppliers from forming connections.

  • Tradeshift workflow and matching — customers may elect to utilize the Tradeshift Pay workflow and matching features as an additional step to address authenticity.  Tradeshift’s workflow matching solution matches incoming invoices with issued purchase orders and receipt documents from the buyers’ systems.

  • E-signatures/digital signatures — in certain countries, authenticity is further addressed through the use of qualified e-signatures/digital signatures. We are proud to offer this service through our partner, Sovos Trustweaver.

The integrity of content and readability

Whether a document is sent using EDI or e-signature, or digital signatures, an integrity signature will be applied. Business documents are ’integrity signed’ when received on the platform regardless of the channel of delivery. For example, if a document conversion is involved on the supplier side, both the pre and post-conversion documents are included in the integrity signature. The post-conversion document includes the human-readable representation encoded as a PDF file.

Effectively this means that the post-conversion document, the pre-conversion document, and the human-readable version are all signed, and conversion traceability may be inspected at both the sender and recipient’s end.

Business documents are signed upon storage to ensure integrity. For scenarios where qualified e-signatures/digital signatures are used, this signature exists in addition to the default integrity signature applied by Tradeshift.


The final aspect of e-invoicing compliance relates to the storage of sent and received documents. A number of specific regulations must be laid in place to ensure to ensure the auditability of the documents by the relevant authorities. With the Tradeshift Pay solution, we store documents in the following manner:

  • The original invoice with signature is stored. Included are certificates or other evidence of integrity and authenticity.

  • Invoices are stored in our facility in Ireland for as long as the supplier/ buyer are customers of Tradeshift. Both parties have their independent storage space on our Tradeshift platform.

  • Storage is within the EU (Ireland), and 24/7 online access is supported.

  • All invoices stored include a PDF human-readable version of the document.

It is, however, uncommon for our customers to utilize Tradeshift for the legal storage of their documents for auditing purposes. It is more likely that audits are performed against the data in the customer’s ERP system. If desired, Tradeshift can refer a customer to compliant storage solutions offered by Tradeshift partners. The options and precise nature of the partnerships depend on the country in question. If interested, contact a Tradeshift representative for more information.

Post audit countries vs. clearance countries

As technologies advance and global trade expands, many governments are searching for ways to close the gaps in their value-added tax (VAT). One common method governments are embracing is the clearance model. Below we break down the difference between post-audit and clearance models when it comes to e-invoicing compliance.

Post audit countries

The ‘post audit’ model for e-invoicing compliance translates requirements from paper-based invoicing to an electronic document format. This allows the free exchange of invoices between business partners but requires business partners to prove the accuracy of their archived invoice records for up to 10 years. This can be done through accessible archives or periodic reporting. Tax authorities use this model across Europe, North America, and APAC, where e-invoicing is generally accepted but not mandated.

Clearance countries

The last 20 years have seen a global shift in tax reporting, as tax authorities have sought to tap directly into the transaction process rather than wait for the taxpayer to report afterward. There has been an explosion of country-specific variations of digital, continuous transaction controls (CTCs) such as clearance and real-time reporting.  We expect that most countries with VAT, GST, or similar indirect taxes will have adopted such CTC controls fully or partially by 2030.

Source: Sovos, Compliance Regimes

Tradeshift uses the term “clearance” countries to refer to some of the countries that use what is referred to as a Continuous Transaction Control model (“CTC”). Within countries using the CTC model, regulations require some level of reporting to the government, either before or during transaction processing. This model originated in Latin America in the early 2000s and has since spread to many other regions. Very little about the emerging global digital tax environment is simple, but we are here to help you navigate the changes as they come.

The two types of continuous transaction controls (CTC), reporting and clearance, may on the surface look similar but are not at all the same, and companies need to know how to operate under each of them.

Basic definitions of the two CTC models:

There are two types of continuous transaction controls — reporting and clearance. These models may appear similar on the surface, but understanding the differences will help you and your company to operate more efficiently. Below we break down these models to highlight the differences in these strategies.

  • Clearance — this term refers to real-time or near-real-time controls of business transaction data, which is submitted electronically. This data is submitted to a tax administration platform whose approval is required for those data points. With clearance, their continued business processing needs to be valid from a tax perspective.

  • Reporting — this model is considered to be out of scope for the Tradeshift Pay solution, as it is a process that takes place post-e-invoicing. The term refers to the periodic, near-real-time, or real-time electronic submission of business data to tax administration platforms. Reporting is done without dependency on the tax administration’s approval for those data points. Unlike with clearance, their continued business processing does not need to be valid from a tax perspective. In some countries where near-real-time or real-time reporting is required, while the reporting itself is not in the Tradeshift scope, compliant e-invoicing is still supported.

Let’s break it down more simply. In the clearance model, the government has an active role at the point of transaction and works to validate the invoice before the transaction is completed.

In the reporting model, companies are responsible for proving the validity of an invoice only after, and not during, the transaction takes place.

CTC countries allow e-invoicing through a clearance model in most situations, requiring invoices to be validated in real-time by a government agency. Because of the unique characteristics of this method, the sending and receiving of invoices work quite differently in CTC countries. At Tradeshift, e-invoicing in clearance countries is carried out in collaboration with a number of partners that communicate with the relevant tax authorities to receive the correct clearances before sending invoices. Tradeshift deployment in clearance countries involves additional costs.

Outbound and inbound clearance

The clearance model can further be broken down into outbound and inbound clearance:

  • Outbound (AR) clearance refers to the invoice issuer’s responsibility to communicate the invoice, whether in whole or as a subset reference, to a tax-administration service. Additionally, outbound clearance entails receiving a predefined approval or confirmation message from that service as a precondition for issuing, canceling, or correcting an invoice.

  • Inbound (AP) clearance touches on the invoice receiver’s responsibility to validate the e-invoice received concerning integrity, authenticity, certificate trust, and clearance.

For countries with a long clearance history, most suppliers will already have a  way to clear their invoices. In countries moving to clearance, suppliers will need a solution to support outbound. Buyers will need a way to verify that the invoice has been cleared Tradeshift supports many countries on the inbound side where outbound may not yet be supported For countries where outbound clearance may not yet be supported, Tradeshift offers support on the inbound side.

Compliance and clearance are changing as countries implement new regulations. To stay ahead of the curve and ensure continuous compliance, organizations need access to real-time information on trends. Tradeshift helps by providing the digital tools and platform you need to support and maintain compliance with local regulations in many countries globally. And, our Tradeshift support team is always ready to help answer any questions you may have.

For more information on how our Tradeshift product suite can help you build a secure and reliant supply chain, reach out to our team of professionals and request a demo today. 

Check out the other parts of our e-invoicing compliance series:

Learn more about Tradeshift’s B2b E Procurement Marketplace