Enabling global tax compliance
How to streamline tax compliance domestically and for cross-border document transactions
By Ioana Ploesteanu, Product Marketing Manager, Tradeshift
Compliance is a vast domain.
Transitioning from paper to electronic invoices (e-invoices) involves one process for complying with B2B e-invoicing mandates using locally compliant document formats, while a separate process is required to ensure tax compliance.
Add to the mix the document transactions between suppliers (e-invoice senders) and buyers (e-invoice receivers) from different countries, and you have the recipe for a very complex process. Much like French cuisine, global, cross-border tax compliance is highly sophisticated.
Let’s break it down.
What’s the difference between tax compliance and e-Invoicing compliance?
Tax compliance is less straightforward than e-invoicing compliance. As a result, ensuring that transactions are conducted compliantly requires additional levels of review from buyers and suppliers. Compared to e-invoicing requirements, tax compliance requirements differ more across countries. Because of this, the specific methodology for ensuring tax compliance will vary depending on which country you are operating in. For example France, Romania and Malaysia are all using a CTC (Continuous Transaction Controls) model, but have adopted it to local requirements.
Despite diverse models and implementations, all mandates share a common goal: modernizing and digitizing global tax systems. At a regional level, in Europe, ViDA (VAT in the Digital Age) is an initiative that drives countries in the European Union, among other standardization rules, to transition to digital VAT reporting that supports cross-border transactions.
Tax compliance refers to the adherence to tax laws and regulations within a specific jurisdiction. It involves accurately calculating, reporting, and paying taxes to the relevant government authorities. Each country can have their own model and interpretation of clearing invoices and reporting taxes. While in Romania there is a centralized model that requires a connection to the e-factura government platform, in France the tax authorities are implementing an interoperability model with PDPs (Plateforme Dematerialization Partenaire) having the role of e-invoicing processing and clearance, while the PPF government platform, to which PDPs are connected, is only used for e-reporting and collect invoice tax information. Other examples are Hungary and Spain where their current mandates require businesses to report VAT in real-time.
E-invoicing compliance specifically refers to the use of electronic invoices in accordance with government regulations and industry standards. It involves adopting electronic formats for invoices, adhering to specific data structures, and ensuring that e-invoices are accepted and processed by both buyers and sellers. For example Germany is introducing a B2B e-invoicing mandate starting January 1st 2025. The tax model in Germany is currently periodic VAT reporting, but the introduction of mandatory use of B2B e-invoices can be the first step towards wider digitization.
While e-invoicing compliance can contribute to overall tax compliance by providing accurate data and streamlining the tax reporting process, they are not entirely interchangeable.
If we put the two compliance processes side by side it will look like this:
Navigating all these different models is easier with a centralized platform that is built based on interoperability principles and is flexible enough to be adapted to constantly changing regulations.
What is the role of interoperability in tax compliance?
Interoperability plays an important role in streamlining tax compliance. Platform interoperability facilitates continuous transaction controls (CTC) by enabling the seamless exchange of data between platforms in real-time.
Interoperability allows for the integration of different systems, such as e-invoicing platforms, accounting software, and tax authorities’ systems. This real-time data exchange empowers tax authorities to monitor transactions as they occur, reducing the risk of tax evasion and fraud.
BONUS MATERIAL: Check out our latest blog on the importance of interoperability between e-Invoicing platforms in France
The Tradeshift platform supports interoperability when it comes to the exchange of business documents between buyers and sellers. To achieve this interoperability, we work alongside several other e-invoicing and B2B networks such as Nemhandel, EESPA, and Peppol.
- Nemhandel — Nemhandel is a Danish network and was the original model for Peppol. On a national level, it became successful when, in 2005, OIOXML electronic invoice was mandated by law in Denmark. As a result, it is a standard infrastructure for submitting electronic invoices in Denmark.
- EESPA (European e-Invoicing Service Providers Association) — membership for EESPA has led to several integrations with other service providers, enabling them to upload invoices on behalf of their customers to Tradeshift customers.
- Peppol (Pan-European Public Procurement OnLine) — the Peppol network is by far the most significant global infrastructure for exchanging business documents. It is, for example, recommended for the B2B e-invoicing mandate in Belgium, and for cross-border exchange of e-invoices in France which has recently endorsed PDPs as the only e-invoicing platforms for clearance.
Tradeshift is one of the founding members of the OpenPEPPOL organization and uses its artifacts and specifications to enable cross-border e-procurement and e-invoicing, and is among the first providers to be registered as a PDP (PDP immatriculée) in France in August 19th, 2024.
So, what is the best tool you can use to help ensure a smooth and efficient e-invoicing and tax compliance process?
Tradeshift’s compliance-as-a-service solution helps to provide the support and tools you need for your organization to remain compliant regardless if you operate domestically or cross-border.
These are the main capabilities of our compliance-as-a-service solution:
1. Platform interoperability
The Tradeshift platform enables the exchange of documents with more than 400 other service providers within these networks based on bilateral or multilateral agreements. Interoperability frameworks governed by national or international standardization organizations set the scene for this cooperation. Everyone involved in the transactions benefits from this collaborative effort by saving time and effort setting up electronic document exchanges. Under the terms of interoperability, Tradeshift, as a Peppol AccessPoint, supports customers to receive invoices from fully onboarded and integrated suppliers on our platform, as well as via the Peppol network. Our connection to the Peppol network allows anyone with an authorized Peppol service provider to send invoices right away.
2. First invoice onboarding for suppliers
First invoice onboarding on Tradeshift is centered around enabling new suppliers to quickly join the network and begin transacting with their buyers. The main functionality of this process includes the ability for suppliers to receive an invitation from their buyer, register on the Tradeshift platform, and submit their first invoice. The platform guides suppliers through the necessary steps to ensure their invoice meets all the required standards and regulations. This functionality is designed to be intuitive, reducing the complexity of onboarding and allowing suppliers to easily comply with e-invoicing mandates. The goal is to make the transition to digital invoicing as seamless as possible, so suppliers can focus on their business rather than on administrative tasks.
3. Capture cleared invoices and document validation
Tradeshift’s platform, connected to clearance systems in various countries, automatically pulls documents from these systems ensuring at the same time data quality. The platform’s Business Firewall automatically verifies invoice data, preventing errors and flagging potential issues such as duplicates or fraud, enabling seamless approvals.
4. Utilizing country profiles for domestic tax compliance
Another great feature of Tradeshift’s tax compliance capabilities is the “country profiles.” Country profiles work to modify our Tradeshift service according to the specific requirements of various countries. Among the modifications that are possible through country profiles is the creation of specific fields in invoices, the validation of legal and tax identifiers, and the list of default taxes that are provided to users of the web UI.
5. Document enrichment and collaboration
With document validations and country profiles, buyers (e-invoice receivers) can enforce mandatory content on a country-by-country basis. However, some things cannot be validated through document validations such as whether the tax amount applied to a certain line is correct on the basis of the type of good or service being sold . In these situations, Tradeshift provides a list of default taxes and can create additional, customized taxes. Still, ultimately, it is the supplier’s (e-invoice sender) responsibility to apply the correct tax to their invoices. And for this we offer the document enrichment and collaboration capability through which buyers achieve straight-through processing and suppliers are shortening their time to get paid.
6. Language availability
Currently, our Tradeshift solutions are translated into 23 languages which are also available as user languages on the Tradeshift WebUI. For a full, updated list of our language capabilities, reach out to your Tradeshift representative. As a software solution built for adaptability, Tradeshift prides itself on staying flexible in the face of tax compliance and regulation changes. We aim to support your specific needs and help to create a more seamless and efficient compliance process.
Tradeshift’s compliance coverage
Tradeshift has a proven process for delivering compliance-as-a-service, and provides customers such as AirFrance, Disneyland Paris, Schaeffler with innovative solutions that support their digital transformation journey and ensure they comply with e-invoicing and tax clearance mandates.
We currently offer compliance-as-a-service for 70 countries, including a streamlined process for complying with tax clearance mandates in 12 countries and e-Invoicing mandates. Examples of countries with tax clearance or B2B e-invoicing mandates that we support are France, Romania, Malaysia, and Germany with other European and APAC countries on our roadmap. To ensure compliance excellence, we continually evaluate emerging global regulations and prioritize the inclusion of additional countries in our roadmap.
We’re also the only company offering cross-zone fapiao e-invoicing capabilities in China and among the first to become a registered PDP (PDP immatriculée) in France.
Ready to streamline tax compliance domestically and for cross-border document transactions? One platform is all you need.
