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E-Invoice Technical Implementation: What Should You Know?

In order to have a unified e-invoicing system that works efficiently, countries are implementing models that define how the invoice should be structured. The most popular of the models is PEPPOL (Pan-European Public Procurement On-Line) network, currently operating in the EU and some other countries, i.e., Australia.

General principles

It describes what data needs to be specified on the e-invoice and how it should be structured within XML or another readable format. Moreover, it defines how invoices should be issued and received, allowing for centralization and collaboration between service providers (access points and certified providers).

PEPPOL standardizes e-invoicing based on EU EN 16931 format, applicable to business and public sector e-invoicing.

As stated in our previous articles, the first transactions to be mandated to use e-invoicing were B2G (business to government). These transactions have to follow the PEPPOL BIS Billing 3.0 format in the EU.

PEPPOL is also the author of the Four Corners Model, which outlines the e-invoicing structure. It includes Corner One — the issuer of the invoice that uses Corner Two. Corner Two is the Corner One services provider or Access point. It stands for software enabling issuing and receiving invoices. Corner Three is Corner Four’s Access point (service provider, also software). Corner Four is the customer receiving the invoice on Corner Three.

This model is applicable if the country is not using the clearance model. If the clearance model where tax authorities control and approve invoices is applied, then two additional corners are included in the chain. The two corners are the tax authority and its access point.

Specific terms

There are several other technical terms worth noting when it comes to e-invoicing, namely: SMP, SML, and CTCs.

SMP or Service Metadata Publisher and SML or Service Metadata Locator work like directories that allow identifying the addressers and receivers of the e-invoices. These registers hold their details. SML is like the central address book for locating the recipients allowing automating the data management. To become certified, SML and SMP services providers join the PEPPOL network.

CTC, or continuous tax control, stands for the actions tax authorities take to monitor transactions. CTCs include mandatory real-time submission of invoices and other mechanisms for real-time surveillance. CTC is separated into different types: clearance, real-time reporting, and reporting.

Among the mechanisms for transaction monitoring are Spain’s SII, Poland’s SAF-T, Hungary’s RTIR, and other models. To find more about these protocols, you can read our overview here.

To learn more about the e-invoicing status quo in the CEE, please read this article.

To find more about VAT in the Digital Age, visit here.

And if you have any questions on how to prepare your business for new e-invoicing requirements, sign up for an individual consultation with 1stopVAT’s professionals.