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Revision 6 May 2020 for comment by ICC Commissions and NCs

ICC Stocktaking Report of the Implementation of Continuous Transaction Controls (CTC) A Complement to the ICC Practice Principles for Implementation of CTCs

Prepared by a multi-disciplinary public/private sector expert group under the auspices of ICC

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Contents1. Introduction.........................................................................................................................................3

2. The Principles......................................................................................................................................4

3. Distribution..........................................................................................................................................4

4. Common features of ‘clearance CTCs’.................................................................................................6

5. Economic impact of CTCs.....................................................................................................................8

6. The costs and risks of varying CTC implementation.............................................................................9

Security and privacy risks to taxpayers..................................................................................................10

Impact of simultaneous introduction of CTCs on trade.........................................................................11

7. Implementation of the CTC Principles...............................................................................................12

Use of data obtained by tax administrations.........................................................................................12

Taxpayer integration with CTC platforms..............................................................................................13

Data to be submitted to the CTC system...............................................................................................17

Overall CTC process design....................................................................................................................20

Authentication & integrity.....................................................................................................................25

8. Appendix: an inventory of CTC variations and trends........................................................................27

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1. IntroductionAs both businesses and governments accelerate their digital transformation, one significant paradigm shift has emerged - tax and other law enforcement authorities are leveraging modern information and communication technologies (ICT) to monitor and control business transactions in real-time (or near-real-time) rather than based on retrospective audits (hereinafter called ‘post’ audits).

For a variety of reasons (ranging from administrative errors and compliance challenges due to legal complexity to criminal activity, such as carrousel fraud), indirect tax systems that revolve around periodic reporting show very large collection ‘gaps. For example, in 2017, the difference between revenues expected and collected was EUR 137 billion. Likewise, businesses often have to employ dedicated staff to ensure compliance via tax-specific processes in traditional tax enforcement. The use of modern technology plays an important role to safeguard revenues and gain efficiencies both for tax administrations and business. For this to happen and to gain the maximum benefit for all stakeholders, the use of modern technology needs to be based on a consistent legal framework and in the context of a cooperative compliance regime, connecting the business/commercial set up and the tax administration systems. It is important to recall this since the use of modern technology will only help achieve the desired efficiency gains if it is embedded in a broader regulatory and administrative compliance strategy, ideally on a global level.

There is an emerging view among public and private sector experts that CTCs, like other forms of technology-driven modernization of revenue collection, have the potential to drastically increase effectiveness and efficiency (including reduced cost to the taxpayer) of government controls, while at the same time increasing legal certainty and reducing the compliance burden on taxpayers. Many emerging economies have already adopted CTCs, often initially focused on digital tax reporting or invoices to improve the collection of VAT and similar indirect taxes. Many industrialised economies are at present evaluating or introducing such controls to supplement or replace existing audit approaches.

There is an emerging consensus among both public administrations and businesses that CTCs have the potential to reduce the worldwide administrative burden on companies while increasing the effectiveness of tax and other public administration controls.

However, this potential will not be fully realised if the implementation of CTCs persists with the current level of diversity of approaches among jurisdictions and law enforcement agencies and without a consistent legal, administrative and technological global framework.

The resulting lack of efficiency for businesses, as well as the risk of non- compliance, jeopardises the benefits that can be derived from digital and paperless processes within the private and public sectors.

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This document focuses on tax and uses the term ‘continuous transaction controls’ or CTCs as encompassing all variations of transaction controls that take place just before, during or just after the actual exchange of specific commercial documents between suppliers and buyers of goods and services. The practices and recommendations set out in this document apply equally to other regulatory or law enforcement bodies using CTC concepts for their purposes. Where this document mentions e-invoices, the same recommendations will generally apply to other types of business documents or reports.

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Both domestic commerce and cross-border trade, as outlined in the dialogue leading to the recent ratification of the World Trade Organisation (WTO) Trade Facilitation Agreement, may be negatively affected.

A public/private sector working group convened by the International Chamber of Commerce (ICC) has been exploring a vision and objectives for the future development of such control systems. Based on the experience and expertise of practitioners from the private and public sector, this Stocktaking Report reviews CTC variations, as well as opportunities and challenges that arise from their different implementations. Based on review by the working group, this document describes certain practices, principles and implementation examples which authorities are encouraged to use upon consultation with business to optimise laws and systems in the interest of supporting digital transformation.

2. The PrinciplesThis document complements the ICC Practice Principles for Implementation of CTCs [link to web source].

3. DistributionWhereas the Principles are public following adoption by ICC’s governing instances on (date, TBD), this Stocktaking Report is provided to stakeholders selectively at the discretion of ICC following criteria recommended by the public/private sector expert group that authored this document.

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What are CTCs?By leveraging the Internet and associated technologies, CTCs enable law enforcement agencies, such as tax and or customs administrations, to collect data associated with business activities that are relevant to the exercise of their functions. Such data is obtained directly from business transaction processing and/or data management systems. As such, CTCs address the inefficiencies that have always characterised the use of retrospective (‘post’) audit, where auditors exclusively rely on data collected from the entities whose activities they seek to audit and this data is collected a long time after the activities to be audited have taken place. CTCs remove this dependency on a ‘static’ approach based on the evaluation of historic ledgers by making it possible for a tax administration to create an automated version of the taxpayer’s records in the form of a dynamic business transaction ledger comprising source transaction data.

In the past years, tax administrations have introduced various CTC designs. Given the lack of maturity of most of these regimes, it is too early to propose formal definitions of the different approaches.

One important distinction that can be made at this point is between ‘reporting’ and ‘clearance’ CTC regimes. Although the reporting obligations implemented by some countries are frequent (including, in some cases, real-time) and granular, they do not interrupt the invoice processing or overall business transactions between the supplier and the buyer. The term ‘reporting’ is commonly viewed as being an obligation to ‘push’ business data to law enforcement agencies where a response (e.g. a receipt acknowledgement) from such authorities is not relevant for continuing the underlying business processes. A response may, however, be relevant for some related processes, such as securing and confirming the right to recover tax on purchase transactions reported to the relevant authority in this way.

The term ‘clearance’ is often used to describe the scenario where the CTC platform is directly involved in the supplier-to-buyer workflow and can halt the processing of a message (today most often an invoice) if it does not meet certain minimum criteria. Clearance can be implemented with or without an accompanying obligation for the invoice to be exchanged between the supplier and the buyer in electronic format; the former is today prevalent but schemes based on the latter are expected to occur more frequently in the future. In all (current) cases, the clearance (approval) of the tax administration is expressed in a code or signature that can be verified by the buyer.

It is important to note that in many countries that have introduced ‘clearance’, certain reporting obligations remain. That said, countries that have implemented clearance or reporting CTC schemes may reduce or even ultimately eliminate certain periodic reporting requirements. A reduction in periodic reporting requirements is often presented as a benefit offered to taxpayers in order to offset the costs of acquiring technology to meet the additional reporting or clearance CTC requirements.

The relative costs and risks of these different CTC models are discussed in section 6 below.

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Figure 1 - Impact on business operations for different compliance models including CTCs

It is also important to consider the impact of different CTC approaches on business processes and systems. Reporting CTCs, as an evolution of traditional periodic reporting requirements, may be expected to have a lower impact on business systems and processes but have little potential to drive process improvement. Clearance CTCs interrupt normal business processes and may therefore be expected to have a higher impact on systems - particularly relevant for high-volume suppliers - but also offer the potential for process improvement through greater automation.

4. Common features of ‘clearance CTCs’An important feature of ‘clearance CTCs’ is that these new types of controls systems usually revolve around – but typically do not exclusively rely on – the submission and approval of granular data from transaction systems as opposed to aggregate data from accounting systems. Invoices have generally been the first type of document to become subject to clearance CTCs. Taking such clearance CTCs as an example, the basic concept implemented by many tax administrations looks as follows:

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Figure 2 - The basic CTC 'template' process.

STEP 1 – OK to issue?

The supplier must create the invoice in a prescribed structured file format with mandatory minimum content.

The supplier must electronically sign this file with a private key corresponding to a public key certificate issued by a Certification Authority operated by or under approval of the tax administration.

The supplier must submit the signed invoice file to the tax administration CTC platform. In many countries, the tax administration specifies both manual (e.g. through a web portal, often for smaller companies) or automated (e.g. through a public Application Programming Interface, or API) options for this submission.

STEP 2 – CTC platform supplier response

Upon receipt, the CTC platform will perform its controls on the submitted invoice file and communicates, typically through the same channel as the one used for submission, its approval or rejection of the invoice. Such approval or rejection often takes the form of a verifiable electronic token (e.g. a digital signature or visible token e.g. a QR code) that is added to the structured invoice file. Only after receiving approval, the customer can use the invoice for indirect tax deduction purposes. If the CTC platform rejects the invoice, the invoice is assumed in most countries to have never been issued.

Significantly, an invoice cannot be issued to the buyer until approval from the CTC has been received.

STEP 3 – Issuance and transmission

Once the invoice has been approved by the CTC platform, the supplier must issue it to its customer. In some countries, an invoice may be sent to the buyer prior to steps 1 and 2; however, such “deferred” clearance creates a risk of having to revoke an issued invoice if the subsequent clearance request is not

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approved. Further, in most clearance CTC systems today, the invoice transmitted to the buyer must be the approved electronic file with the approval token that was returned to the supplier or its service provider in step 2.Nnonetheless, a number of more recent CTC implementations have opted for clearance CTCs without mandatory electronic invoicing. The physical transmission method of the invoice is often not explicitly regulated. In countries with clearance CTCs that have also mandated electronic invoicing, the use of e-mail is prevalent. In certain cases – particularly where the issuer is a small or medium sized company – the invoice may be issued via a web portal that provides access to the CTC system; in some countries/circumstances, the buyer may also have to retrieve the invoice via this portal method.

STEP 4 – Buyer CTC validation

In most jurisdictions, a buyer is not allowed to accept non-compliant invoices. If he accepts an invoice that failed to be approved by the CTC platform, input VAT/GST cannot be reclaimed. Upon receipt of the invoice and prior to any business controls to be performed on it, the buyer will therefore usually have the option or explicit obligation to verify the clearance/approval token. In some cases where no obligation exists to exchange the invoice electronically, the buyer may have the option to verify the unique code or number issued by the CTC platform using an offline tool; however in most cases, this validation step is performed in an online procedure.

STEP 5 – CTC platform buyer response

Where buyer CTC validation is performed online, the CTC platform will upon receipt of the digital file perform its controls and communicate, typically through the same channel as the one used for submission, its approval or rejection of the invoice back to the buyer. Such approval or rejection often also takes the form of a verifiable electronic token (e.g. a digital signature) that is added to the structured invoice file; this validation evidence must in most cases subsequently be stored together with the buyer’s invoice.

Significantly, an invoice cannot be validly processed and posted until approval from the CTC has been received.

5. Economic impact of CTCsIt should be noted that the impact of implementation choices of a CTC scheme can vary significantly depending on parameters that are specific to a jurisdiction at a specific time. Public authorities should work together with businesses and other stakeholders to perform an economic impact analysis prior to introducing CTC schemes.

This section describes on a high level the economic impact that different forms of CTCs can have when introduced and operated in accordance with the Principles and the practices described in this document.

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Figure 3 - Economic benefits of different CTC schemes (high level overview; the impact can vary depending on specific circumstances per jurisdiction).

Some countries are introducing standardisation frameworks for the electronic exchange of invoices and other commercial documents. Such measures are often driven by public procurement considerations, sometimes complemented by economic or tax considerations. This trend is noted in Figure 3 for the sake of completeness; it is not described or analysed further in this document.

Figures 1 and 3 combined show that while clearance CTCs with mandatory e-invoicing often generate the highest impact on taxpayer systems and processes, such systems (if implemented following recommended practices) can also generate the highest economic benefits.

(more descriptive text about Figure 3 to be added here).

6. The costs and risks of varying CTC implementationWhile many practitioners agree that the CTC concept has great potential for reducing administrative burdens on businesses, the variation among CTC implementations across jurisdictions is of great concern to companies doing business across borders.

Such variation occurs on four levels:

Impact on business processes and systems – As noted above, reporting CTCs tend to be less intrusive on business processes and have a lower impact on business systems than clearance CTCs. Reporting CTCs are, however, only well suited to near real-time controls. To the extent that different approaches can

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meet the same needs of authorities’, consideration should be given to minimising the administrative impact on business.

Lack of cross-border transaction interoperability – At present, very few jurisdictions with CTCs in operation have extended the mandatory use of such platforms to import or export transactions. Some specific bilateral initiatives, such as that between the USA and Mexico, exist. Also, in Latin America a container format has been designed which could be used to enable cross-border use of one country’s invoice format without the need to convert to the receiving country or a common ‘Esperanto’ format; this scheme is not currently in operation, however. This means that commerce between countries with mandates for CTCs is often still entirely or largely paper based.

Data level differences – In addition to the discussion on the scope of data to be submitted to CTC platforms, it must be pointed out that the vast diversity on the syntax and semantic level of such data among jurisdictions is one of the biggest problems for companies and service providers operating in or facilitating transactions under the laws of multiple countries. It is crucial that law enforcement bodies that operate or supervise CTC platforms adopt interoperable data formats and use common definitions of data content1. There is an urgent need for a focused international project bringing together stakeholders, experts and practitioners from both the public and private sector to start working towards harmonising data formats for CTC (and potentially similar, such as public procurement) purposes. Finally, it should be noted that in some countries e.g. Brazil the process to meet e-invoicing requirements in import scenarios consists of self-issuing via the CTC platform of a locally compliant invoice corresponding to the import invoice. In other countries e.g. Korea, the invoice is recreated by the tax administration based on customs documentation.

Data process fragmentation – Similarly, no two countries with CTCs in operation have the same scope and orchestration of mandatory data exchange with such platforms. In one country (e.g. Italy), an erroneous invoice must be credited, and a corrective invoice issued via the CTC platform. In another country (e.g. Mexico) the process for errors is through supplier cancellation with the CTC platform. Such major differences in design of common business processes create very high structural barriers to international trade in a world where CTCs are increasingly the norm. The section entitled ‘Invoice error correction management’ further below in this document provides further guidance on CTC practices that need to be developed in this area.

Security and privacy risks to taxpayersMany of the risks associated with diverging implementations of the CTC model are related to security and privacy. If a company must meet structurally different process, data and authentication requirements for multiple jurisdictions from a single enterprise system, this will weaken its defenses. Higher security exposure of data processed by taxpayers also includes personal data that are protected by privacy and data protection legislation.

Companies are also concerned about the security and privacy of their data shared with CTC systems. Recommended practices in this regard are set out further below in this document.

1 One example of a standardized dataset for the invoice is the European Norm (EN 16931-1:2017) and its list of syntaxes (TS 16931-2:2017).

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Impact of simultaneous introduction of CTCs on tradeModern information and transportation technologies are removing friction from commercial processes at a rate that has created a vast opportunity for companies of all sizes to address global markets at very low costs. E-commerce and e-business methods have effectively established a real-time global economy driven not only by multinational enterprises but rather consisting of diverse borderless trading systems where most cross-border transactions are performed by SMEs. This real-time economy can only exist and thrive on the condition that friction in the global trading system does not increase. In addition to the practices outlined for individual CTC systems, it is important to note that the costs to the world economy of many CTCs being introduced simultaneously could be very high. Whilst the adherence of each such CTC system to the practices outlined in this document will make a big difference in the collective impact of such introductions, the costs of even the smallest differences in approach are exacerbated if many CTC systems are introduced within the same time period. Governments are encouraged to work together and with other stakeholders to ensure that also on a macro level the timing of introducing CTCs is managed in a manner that enhances rather than weakens business efficiency.

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7. Implementation of the CTC PrinciplesDespite general adherence to the basic CTC concept set out in Figure 2, a great deal of variations can be observed among jurisdictions on a more detailed level. The level of diversity in design and implementation is enormous; it is this fragmentation that represents the greatest risk of sub-optimal outcomes despite good intentions and the potential of CTCs for reducing friction between businesses and tax authorities.

All the challenges caused by variations among CTC systems, as well as challenges common to such systems in most countries, that are described in this document are magnified not only in multinational corporation environments, but a fortiori for small and medium sized companies that want to take advantage of electronic commerce and business networks to sell into markets around the globe.

This section illustrates in greater detail how the ICC Principles for Implementation of CTCsset out in this document can be applied to specific CTC use cases and scenarios. It also provides recommendations that authorities should consider as a basis for developing interoperable CTC systems that maximise the opportunity for both the private and public sectors.

Use of data obtained by tax administrations

Practical challenges encountered CTC implementation practice recommendations

Confidentiality and privacy: It is critical for business confidence that the law enforcement authority or certified private entity that operates the CTC platform treats submitted business data in accordance with internationally accepted security standards. Particularly, the confidentiality of such business data is paramount. Authorities often do not communicate about the security standards used by their CTC systems.

There should be a strict separation between CTC and other public administration or business systems to ensure that only authorised personnel of the CTC platform can access such data. Even though the data may be available in a platform under the direct control and responsibility of a law enforcement body, the provision of such data to other government or law enforcement bodies should be subject to the same safeguards (e.g. a court order) as those in place for these law enforcement agencies to request data from companies or citizens. Where data gathered by CTC platforms is used for legally authorised non-fiscal purposes (e.g. economic statistics), safeguards should be in place to protect taxpayers from being identified or to eliminate the possibility of data pertaining to their business being derived from such statistics. Authorities should adhere to internationally recognized standards of IT security, including the OECD Security Guidelines2. Authorities should ensure that taxpayers do not violate any requirements (under e.g. data protection law) because of their obligation to submit certain business data to a CTC platform.

2 http://www.oecd.org/sti/ieconomy/15582260.pdf

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Exchange of data among tax administrations: Businesses are concerned about the lack of information on the extent to which authorities from different jurisdictions can share data collected via CTC systems among each other.

Transaction-level data collected by a tax administration that uses CTCs can be used to facilitate mutual assistance between tax administrations and contribute to a faster resolution of double taxation issues. It is important that the exchange of such data between or among tax administrations adheres to strict rules on security and appropriate use, in line with the recommendations for individual jurisdictions set out in this report and those set out in the OECD Guide on the Protection of Confidentiality of Information Exchanged for Tax Purposes.3

Retention period and taxpayer access to CTC data: Businesses are concerned about the lack of information about the period during which CTC systems retain their data, as well as about the conditions under which they can access their own information in CTC systems should circumstances so require.

Law enforcement authorities that operate CTCs should specify the period during which they retain submitted data. Businesses should be able, under reasonable conditions, to request access to, or copies of, their submitted data in specific circumstances (e.g. destruction of systems due to natural disasters or criminal activity, or where objectively needed for purposes of commercial litigation). Note. Most businesses keep the data also in their own systems, which is advisable in all cases as a business should not be dependent on a CTC system as the ‘single source of truth’.

Taxpayer integration with CTC platformsMany issues arise in relation to the ways in which taxpayers’ systems can or must be integrated with CTC platforms. The following is a non-exhaustive list of issues that are often highlighted:


Mandatory versus optional use of CTC systems: Integrating to a CTC platform is a significant investment for businesses and, perhaps more importantly, a significant distraction from a company’s existing IT and process improvement roadmaps. It is important that authorities use their powers wisely to make such use optional or mandatory.

Pilot projects concerning a voluntary use of CTCs in some countries have shown relatively low levels of business adoption. Tax administrations should strive for voluntary adoption schemes to be clearly defined and based on demonstrable benefits to businesses. For legal certainty and business planning purposes, the responsible authorities should unambiguously state whether there is a roadmap towards mandating CTCs and what this roadmap entails. As shown by experience, for example in South Korea, it is advantageous to create a critical mass based on benefits for voluntary adoption prior to issuing a

3 Available for download under conditions specified by the OECD at http://www.oecd.org/ctp/exchange-of-tax-information/keeping-it-safe-report.pdf

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mandate.

Accessibility of legal and technical requirements: It is sometimes difficult for taxpayers and other stakeholders to find and access information that is required to integrate their systems with a CTC platform.

When an authority makes a CTC system available for optional or mandatory use, it is imperative that all legal and technical requirements for the integration with, and the use of, such platforms be easily available to all taxpayers and their IT partners. All relevant requirements should ideally be published in a single information portal where up-to-date documentation on legal requirements and technical specifications, as well as user-oriented documentation for Graphical User Interfaces (GUIs) within the CTC system, can be accessed. To allow taxpayers to freely choose an IT partner to provide them with the CTC access, it is important that software vendors and other third parties can access the requirements without the need to have a local tax identification number.

Quality of documentation: The quality of the integration documentation varies per jurisdiction or there are differences in quality between technical and functional descriptions provided by one jurisdiction.

All documentation that a taxpayer needs to meet its CTC-related obligations should be of high quality and well-maintained. Documentation should be comprehensive and written based on best practices for each documentation type, paying attention to the type of audience a document seeks to address. Law enforcement authorities are advised to engage their communication departments to review documentation quality and structure.

Language aspects: Tax administrations often prioritize (the) official language(s) in their jurisdiction in the publication of their CTC integration documentation. This can be problematic for foreign taxpayers and their IT vendors.

It is recommended that CTC documentation and information for taxpayers be published in at least one international language alongside a country’s official languages(s). Such translation should not be ‘informal’ or published ‘as is’ but constitute an equally reliable source as the documentation provided in the official language(s).

Initial CTC implementation: There is often a significant amount of anxiety among taxpayers about the transition to a new model of tax enforcement based on CTC concepts.

When CTCs are first introduced, there should be a voluntary ‘proof of concept’ phase where taxpayers are incentivised to first extensively test and subsequently adopt this new method on a voluntary basis, in close coordination with the responsible authorities. The roadmap to a compulsory use of the CTC system should be unambiguous and the ‘proof of concept’ period should not be too short or too long. Initial CTC implementation should be done in consultation with the local and international business communities. Businesses should, as a rule, have at

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least twelve months to prepare their systems and processes prior to the effective date of a CTC mandate. If the responsible authorities decide to postpone the effective date, they should endeavour to do so in a manner that does not disadvantage taxpayers that have appropriately prepared for the new compliance requirements, compared to taxpayers that have not taken such measures within a reasonable time. All communication about the entry into force of a CTC system should be managed professionally and be accesible to all domestic and international stakeholders.

For the avoidance of doubt, CTC laws and/or system specifications should clarify that it is not permitted to exchange paper or other electronic documents as legal invoices outside the CTC system. When documents or data that may be confused with the legal invoice is exchanged between the trading parties outside the CTC system, they need to be clearly distinguishable from the legal invoice that is processed through the CTC system.

Change notifications and implementation time: A timely issuance of notifications is critical for the successful operation of CTC systems.

Changes to CTC systems, laws or specifications should be limited and only reflect enhancements that are consistent with best practices. Such changes should be prepared in consultation with the local and international business communities. Notifications of changes about any requirement to submit data to a CTC platform should be unambiguous and published in a timely manner. The recommendations in this document concerning accessibility, quality and language aspects of CTC-related laws and specifications should also be considered for change notifications. Taxpayers should have a reasonable time (a reasonable timeframe is 12 months for changes with a significant impact and 6 months for changes with a moderate/minor impact) to adjust their systems and processes for compliance, considering the scope and the degree of difficulty that such changes entail for businesses.

Transparency of controls performed: Few countries with CTCs in operation today disclose the controls they perform on data they receive via these sytems.

If controls extend beyond verifying compliance with the law and/or specifications that guide taxpayers in their use of the CTC platform, it is recommended to describe such controls to allow taxpayers to put in place their own processes to ensure predictability of ongoing compliance; where relevant taxpayers can,

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for example, use audit decision support systems for these purposes. In this context, stakeholders should also consider cooperative compliance concepts, such as those defined by the OECD4.

Fines and impact on ability to deduct VAT: Taxpayers often are not certain about the legal implications of errors or omissions in relation to their interaction with a CTC system.

It is recommended to provide comprehensive information about the impact that non-compliance or non-completion of processes within the CTC platform will or may have in terms of penalties, fines or taxpayers’ ability to deduct VAT. In accordance with internationally recognised principles of public law, such information should be easily available and such negative consequences should not be applied retroactively.

Neutrality about do-it-yourself vs vendor-based integration: Some countries do not provide sufficient clarity whether taxpayers are allowed to integrate their systems with a CTC platform using their “home-grown” solutions or whether assistance by an external software vendor is needed.

Authorities responsible for publishing documentation or information on how to connect taxpayers’ systems to CTC platforms fshould permit businesses to choose to access/use such systems either with their own IT resources or by r by outsourcing all or parts of such tasks to third parties. Neither of these options should lead to reduced legal certainty. Hence, the responsibility of third parties involved in the integration or use of CTC platforms on behalf of taxpayers should be clearly explained/ This includes unambiguous descriptions and legal categorisation of different types of third parties that may intervene, especially if the CTC regime in place works with the concept of certified, accredited or otherwise ‘approved’ third parties acting between the taxpayer and the CTC platform. Ideally, CTC platforms and processes should be designed to allow one company to mix and match different direct and intermediated models.

Neutrality regarding the application/system that calls the CTC point: Primary and secondary laws that codify the option or obligation for taxpayers to use the CTC platform often have an implicit – or even explicit – bias towards certain types of enterprise software or systems from which they assume the data and technical connection must originate. Significant uncertainty can arise when the law requiring CTC integration makes implicit assumptions

It is important to note that enterprise software and systems have been evolving continuously i and that any assumptions about the software used by taxpayers may create legal uncertainty or errors in the design of integation tools used by businesses to connect to CTC platforms. Unless a law enforcement authority deliberately targets a certain category of business systems, integration documentation should ideally be written in a neutral manner and give businesses the maximum freedom of choice as to the integration point(s) towards the CTC platform.

4 See https://www.oecd.org/publications/co-operative-compliance-a-framework-9789264200852-en.htm

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about the type(s) of business systems from which such integration must or can be done.

Availability of test systems and certification: Many CTC platforms do not provide IT environments permitting taxpayers to test their integrations prior to the use of the actual production environment. This may mean that companies or their service providers cannot conclusively test their integration with the CTC platform until they start exchanging production data. As a result, they have no choice but to expose themselves to the legal consequences of submitting incomplete or erroneous data. Since CTC requirements often change frequently, this lack of user acceptance testing (UAT) environments can be an ongoing problem for businesses.

UAT environments should be made available for end-to-end testing by taxpayers. Such systems should have relatively low authentication thresholds so that third parties or companies that do not yet have a formal tax registration number or production access credentials can easily prepare their integration.

Price and quality of software/hardware/integration vendors: Countries that introduce CTC platforms often work with local software, hardware and/or integration vendors necessary for the effective rollout of such schemes well in advance. This is highly commendable, but public authorities should avoid such local cooperation schemes leading to intentional or inadvertent technical or commercial obstacles for non-local vendors or foreign taxpayers.

The law enforcement body launching a CTC scheme should provide information to, and communicate with, local vendors in a manner that avoids potential abuse of their early insights into specifications and/or access to systems. Particularly in countries where third parties providing software, hardware or integration services for connecting to CTC platforms have the option or obligation to pass formalised tests or obtain certifications, it is important that such programs are open in a non-discriminatory manner to all entities meeting the minimum criteria.

Taxpayer migration between systems or vendors: In some countries, it is costly or risky for taxpayers to change the way in which they access a CTC platform; this creates unnecessary burdens.

Authorities responsible for CTC schemes should ensure that it is possible and easy for businesses to migrate between different internal business systems or external vendors used to access the CTC platform. This may include measures to ensure portability or easy renewal of access credentials, as well as ensuring that approved CTC access vendors do not unreasonably hinder such migration and adhere to a single strict set of access technologies.

Data to be submitted to the CTC system


Use existing standards: CTC platform Tax administrations and certified agents operating

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specifications often create new data standards from scratch, or they use different standards from those commonly applied by businesses.

CTC systems on their behalf should where possible use ubiquitous data standards for documents that must or can be exchanged with the CTC platform.

Recent trends in customs administrations include digital data transmission and single window systems for receipt of digital trader documentation. To support this digitisation trend the World Customs Organisation (WCO) has published a “WCO Data Model” which includes invoice data for each trade item. CTC platforms should be designed in consideration of the requirements of this WCO Data model.

Use business-compatible document definitions: Some CTC systems require the submission of data files that combine data from documents that are typically used as separate datasets in business transactions. This forces businesses to make counter-intuitive changes to their systems and processes.

In real-time ‘clearance’ scenarios, it is important to use data generally available in the taxpayers’ transactional systems – for example, only the invoice and not the invoice combined with master data, ledger data or inventory data. Combining data from different systems for a single submission to a CTC platform can only work if the frequency of the submission is low. It is generally better to define specific ‘calls’ to a CTC platform for discrete datasets as commonly defined and processed in business systems – existing Electronic Data Interchange or more modern business-to-business messaging frameworks can be used to design such approaches. Since the imposition by a tax administration of a single or limited number of structured invoice definitions for a specific jurisdiction is likely to have a significant impact on business behavior, it is important that tax administrations that maintain specifications for data structures to be exchanged with CTC platforms participate in relevant business standards bodies, or, at a minimum, ensure a formal liaison so as to ensure maximum alignment between mandatory and voluntary business data transmission standards. Similarly, where public authorities impose a transmission standard for purposes of public procurement data interchange, it is critical that authorities imposing CTCs coordinate their specifications closely with those used in such public procurement systems.

Tax invoices versus business invoices: Tax administrations often require a minimum data set as specified by the applicable substantive tax law, while larger businesses

It is important that the definition of an invoice for the purposes of submission to a CTC system include all data points that businesses need to ensure proper tax coding based on invoices (e.g. ship-from/ship-to,

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often need more data for their internal processing and controls. In some countries with ‘clearance’ requirements, tax administrations require the submission of business invoices (containing additional data not explicitly required for CTC purposes). In these cases, a specific section may be reserved for additional data in the prescribed invoice structure, or the tax administration may attempt to specify all possible business-relevant fields in the mandatory invoice structure.

UNPSPC codes). It is recommended that the structured format or schema published by a tax administration for purposes of mandatory exchange with a CTC platform allows business data to be added (e.g. in an addendum) that is not required for tax compliance purposes. The CTC platform should not audit such additional business data and this extra data should not be used in the data-analysing process, for example, for audit selection purposes; it could lead to unnecessary field audits. In all cases, it is important that the tax administration specify very clearly whether it is possible for businesses to exchange ‘invoice data’ outside the data that can or must be submitted to the CTC platform; the tax administration should also clearly describe the tax status of business invoice data – or full ‘business invoice’ – exchange outside the CTC process between the trading partners.

Multiple invoice definitions per jurisdiction: In some countries, multiple invoice types and schemas apply for different sectors and scenarios. Especially when the applicability of a specific invoice schema is influenced by factors other than the nature of a company or transaction(such as an ongoing tax audit or litigation), it can be very difficult for business systems and processes to choose the right invoice data and format.

Tax administrations should ideally specify one single invoice data format that addresses all transactions within broad categories e.g. business-to-business or business-to-consumer transactions. This format should support invoice/receipt concepts from the applicable law e.g. simplified invoices, continuous supplies, summary invoices.

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Overall CTC process designSeveral important issues arise in relation to the processes that taxpayers must follow to exchange data with CTC platforms of different kinds. These include, but are not limited to, the ones listed below:


CTC system has no published service levels: legal certainty and the ability for businesses to ensure robust technical integration with CTC platforms are undermined if ,for example, system response times, access to the CTC system operator’s technical support, system availability, scheduled downtime for maintenance etc. are not clearly communicated.

CTC specifications and manuals should include appropriate CTC transmission service level agreements (SLAs).

CTC platform invoice transmission to the buyer: Some ‘clearance’-type CTC platforms are designed not only to receive and approve invoices as a step in the end-to-end process operated by the supplier and the buyer, but also serve as central transmission hubs in that process. See below for further information.

Such functions overlap significantly with core enterprise software and business processes that have evolved over the past three decades to remove friction from supply and demand chains.

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Figure 4 - CTC platform invoice transmission versus the clearance-only model

In the schematic overview of these different approaches shown above, it should be noted that in both cases it is often possible for the trading partners to use intermediaries; hence in the second scenario, the CTC platform would deliver the invoice to a buyer-designated third party that acts on its behalf. Also, in the above schema, the buyer often has no reason to perform step 3 (since formal validation of the invoice as having been received/approved by the CTC platform is implicit) if the invoice was directly delivered to it by an authenticated channel of the tax administration. However, the buyer still needs to perform all material invoice approval processes required for business and tax compliance purposes.

Each model has its certain benefits and drawbacks:

1. The traditional invoice clearance CTC model can be complex and expensive for companies to adopt. As a result, some companies adopt minimum compliance measures based on delivering the cleared data to their customers via simple delivery channels such as email. These delivery methods are not conducive to accounts payable automation on the buyer’s side. When the CTC platform sends the electronic invoice data to the buyer, this can be done in a consistent and technically more robust manner that allows buyers to automate their AP processing.

2. The model with invoice transmission by the CTC platform makes it difficult for larger companies to use cloud-based and other (e.g. EDI) procurement of order-to-cash platforms which tend to optimise processes by re-using sales and purchase data (e.g. orders, goods receipt notifications, invoices) to streamline and ensure quality in the end-to-end process

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between a supplier and a buyer. As such, models that require invoices and other business transaction data to be exclusively transmitted via the CTC platform risk reducing the economic benefits of automation and can stifle innovation in the enterprise software segment that facilitates business-to-business transaction automation processes.

A hybrid that takes advantage of the benefits of each model, while reducing or avoiding their drawbacks, could look as follows:

Figure 5: possible hybrid model

In this potential hybrid model, different supplier-buyer relationships can adopt the invoice delivery method that is proportionate to the supplier’s size and level and technology adoption. This model promotes automation while considering the need to cater to the whole spectrum of taxpayer types and sizes.

It should be noted that the above hybrid approach does not require a ‘clearance’ CTC model with mandatory e-invoicing; it could also operate in a real-time reporting CTC environment, in which case the invoice delivery via a B2B channel could remain on paper. For the difference in economic benefits between reporting and clearance CTCs, see the section entitled Economic impact of CTCs

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Buyer validation with the real-time platform: The buyer validation step presented in Figure 4 as part of the basic CTC concept is not always present or explicitly regulated. In Italy, for example, the ‘clearance’ system does not have a buyer call to validate that the invoice was indeed correctly issued via the CTC platform by the supplier. This paragraph only addresses the formal obligation for a buyer to send a validation request to the CTC platform and await the tax administration’s confirmation or approval before being permitted to finally book the invoices. A general obligation for a buyer to have processes in place to ensure that the invoice reflects a real supply remains in place in all systems.

While most CTC platforms have a well-documented technical buyer validation ‘call’, the legal obligation to use it is sometimes unclear. This makes it important for taxpayers to fully understand the underlying design assumptions of the CTC platform, and derive their process design concerning buyer validation from an individual risk assessment. Such legal uncertainty can be costly for companies and distort competition.

Figure 5 6- Buyer validation in the basic CTC model.

‘Closing the loop’ buyer responses: An increasing number of countries that have had CTCs for some time are adding mandatory purchase-side messages regarding the acceptance of the invoice. Such messages may have to be sent to the CTC platform, to the supplier, or to both. There may be an obligation to send several messages corresponding to subsequent steps in a typical invoice approval workflow (e.g. technical receipt acknowledgement; invoice is complete; OK to pay etc). Such information can be used by tax administrations to further refine their understanding of the status of an invoice.

When requiring additional response messages about invoice validation stages within the buyer’s environment, it is important to consider that such detailed invoice workflow information may be only be available from software that is designed for such approval processes. Such software often works closely with the buyer’s accounting or ERP system and may not organically integrate with the invoicing or B2B transaction automation system for detailed structured message flows back to the supplier or CTC system. Ideally, buyer response messages should be kept to a minimum and only require integration with the CTC system ut not the creation of entirely new reverse data flows from the supplier’s system to the buyer’s.

Invoice error correction management – Existing legal requirements vary significantly among jurisdictions in relation to the procedures that must be followed if the supplier or buyer finds an error in an issued invoice. Today’s invoice correction processes take a variety of forms: credit notes, debit notes (with or without the requirements for the other party’s confirmation)

The introduction of CTCs provides an opportunity for tax administrations to work together and collaborate with businesses to develop a single process for invoice error correction. Maintaining existing diversity among such procedures from country to country, or introducing new but equally diverse procedures, creates a risk of significantly

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buyer-issued self-billing credit notes, and other types of corrective invoice. Requirements and practices tend to differ substantially from country to country.

Even though the existing variety of invoice correction processes increases costs and risks (see previous paragraph), CTCs also often prescribe completely new corrective invoice processes: specific new credit note processes and content; supplier cancellation processes, with or without buyer confirmation; buyer invoice workflow status messages that must be sent back to the supplier and/or the CTC platform; or specific time periods within which the buyer may fully or partially reject an invoice (this is sometimes reserved for specific invoice types only) absent which acceptance and tax liabilities are assumed. Sometimes, credit note and CTC-specific correction processes co-exist.

In addition, even when ‘classic’ credit note processes continue to exist in a CTC scheme, practices for buyer-issued credit notes based on self-billing concepts may not be available under that CTC scheme.

lowering the potential economic benefits of CTCs.

The practice notes below should be read in conjunction with the recommendations in the section entitled ‘CTC platform invoice transmission to the buyer’ above.

An internationally standardised invoice error correction process should consider the following business requirements:

Where trading partners have chosen to use the CTC platform for invoice transmission, buyers should be able to initiate a formal invoice rejection process via the CTC platform, which would then notify and obtain an acceptance of the supplier. The reason for this is that it is not always possible or cost-effective to onboard e.g. very small suppliers onto EDI or procurement systems – and generally there is no expectation that the (O2C/P2P…) process can be automated end-to-end.

The desirability of enabling buyer-initiated invoice correction also applies where the trading partners have chosen to use their own business-to-business methods (rather than the CTC platform) for invoice transmission. The CTC process can use ‘clearance’ for the invoice issuance/receipt process itself, but the interaction with the CTC platform should be a ‘reporting’ process for correction documents.

Non-tax function of CTC platforms (e.g. factoring): Data concerning buyer acceptance of an invoice can also be used for invoice financing purposes, which essentially adds a trade facilitation function to a CTC platform that was originally designed for tax law enforcement purposes.

Using CTC systems for such functions can be economically advantageous if other recommended practices are followed and if on that basis it becomes possible, in a non-intrusive manner, for the tax administration and/or other public authorities to develop and monitor better processes and requirements for invoice financing schemes.

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Contingency invoicing: Relatively few jurisdictions with a CTC system have processes in place whereby documents can be issued and used provisionally if ,despite reasonable efforts on the side of the taxpayer, the taxpayer’s source system cannot establish a connection to the CTC platform.

A CTC platform ashould allow taxpayers to create provisional versions of the documents (e.g. invoices) in an offline manner should a technical failure – typically outside the control of the taxpayer – make it impossible to perform the required submission to the CTC platform. As soon as the platform is accessible again, the taxpayer should be able to retroactively submit and obtain approval of such documents. Such contingency functionality is particularly critical in cases where CTC platform approval of a document is required for the transport of sold (especially perishable) goods to commence.

Payment-related reporting: Some countries require information about payments for the underlying supplies. Sometimes their systems address only the issues relating to partial invoice payment.

The CTC regulations should consider that payment information can often only be obtained from core enterprise systems which may not have enough integration with business transaction transmission platforms.

Authentication & integrity


Hardware vs software based: Until now, most countries that have introduced CTC systems have specified the use of ‘soft’ public key certificates and electronic signing or authentication keys. In other words, such security tools can be used without the need of the taxpayer or its service provider to acquire specific hardware for key generation and protection.

Many countries that are currently planning or discussing the introduction of CTCs have stringent legislation around the validity and use of digital signatures or certificates. Such countries should not require the most secure levels of digital signatures or certificates so as not to inadvertently create additional cost and complexity for businesses by mandating hardware-based solutions.

Use of existing business standards: Many tax administrations do not the same digital signature requirements within a CTC system as those ubiquitously used among businesses.

When requiring the use of a specific digital signature or other techniques or technologies for transport-level or data-level trust or security, legislation and/or CTC platform specifications should incorporate the existing international standards in these areas. Designing new or adapting existing standards can be a major burden for companies and their services providers in interacting with CTC platforms.

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Mutual recognition: Compliant digital signatures for the purposes of data exchange with CTC platforms are nearly never interoperable with those used for the same purposes in other jurisdictions.

Wherever possible, legislation and CTC platforms should ensure that taxpayers which are part of multinational groups or taxpayers that are established outside their jurisdiction can use foreign equivalents of digital signatures or other techniques or technologies for transport-level or data-level trust or security. Where the local electronic signature law – whether based on international treaties or unilateral provisions – does not provide for realistic methods to achieve this objective, it is recommended to provide clear guidance on how such taxpayers can obtain the necessary approvals to this end.

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8. Appendix: an inventory of CTC variations and trends

Status of the CTC platform Different governance structures exist for the management of CTC platforms: while some are owned and operated by the relevant tax administration itself, other countries (e.g. Mexico, Russia, Turkey) have created a new regulated industry of CTC platform service providers which perform CTC controls on their behalf. Such certified or accredited CTC platform operators are often restricted in the pricing of regulated CTC functions and generate revenue by providing additional value-added services outside of these regulated areas.

Role of service providers Particularly in countries where the core CTC platform is operated by the tax administration in question, the law sometimes creates service provider accreditation to facilitate the data exchange between businesses and the CTC platform. Such accredited service providers then normally are the only type of third party a business case use to connect to the CTC platform, although it is also typically possible for (particularly larger) enterprises to connect to the CTC platform from their own IT resources as well. Outside these common setups, the role of B2B transaction automation (e.g. EDI, P2P, order-to-cash, customer communications management etc) service providers is often unregulated and such vendors are viewed as acting under the taxpaying company’s responsibility.

Data submission timing Near-real-time CTC systems typically extend existing indirect tax reporting concepts by increasing the frequency of the reporting obligation and the granularity of the data to be reported. These kinds of near-real-time CTCs (e.g. SII in Spain, Hungarian real-time invoice registration) may therefore legally coexist with electronic invoicing regimes that remain based on the concept of post audit of data stored by businesses.

Functional and data scope Within CTC clearance approaches , there has from the beginning been a broad variety of mandatory processes relating to the invoice such as supplier cancellation, buyer responses (structured and often signed data to be sent to confirm different levels of invoice acceptance to the CTC platform and/or buyer), debit/credit notes, and contingency processes for when the CTC platform cannot be accessed. Also, many countries with real-time invoice process controls have introduced requirements for companies to print transport documents based on approved invoice data using authentication techniques such as bar codes. In addition to invoice processes, over time several countries have added other data types and business transactions such as invoice payment data, inventory movement data, booking data, fixed asset data etc. The latter two categories are less suitable for real-time submission and are often requested as less frequent reporting obligations.

Cross referencing of supplier and customer dataSome countries implementing CTCs cross-reference transactional data obtained from both supplier and customer in order to verify and in some cases even to approve those transactions. This can, for example, allow a tax authority to make recovery of tax incurred on purchases conditional upon the tax

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authority confirming that the supplier has reported the corresponding sale and made the appropriate tax payment on that same transaction.

Use of CTC platforms for economic growthMany experts consider that the introduction by tax and other public authorities of jurisdiction-wide structured data standards for communication between trading partners and CTC platforms contributes to standardisation and interoperability among business systems within such geographies. Other, more explicit uses of CTC platforms include their use as repositories for business-relevant data e.g. to enhance transparency and avoid fraudulent use of factoring and other value-added services.

Supplier controls vs bilateral controls Some countries place all or most of the CTC controls on the supplier in the underlying business transaction. These countries often leave other VAT requirements (e.g. periodic audit of aggregate data) unchanged for the buy-side of the transaction.

Physical supply chain impact As mentioned, many of the CTC systems that have been in operation the longest include the use of authenticated hard copies of invoice and other business data for purposes of physical controls of goods in transit. Law enforcement officers that inspect transport vehicles can cross-check the approved statutes of each consignment with the CTC transaction database. Further, the impact on physical supply chains is the greatest in real-time controls systems where each next step in a business procure-to-pay or order-to-cash process is contingent upon receiving the necessary electronic government approval first. Such features give law enforcement authorities an unprecedented level of control over supply chains. The introduction of payment-related and trade finance-relevant data within the scope of mandatory CTC systems further increases government control over financial supply chains.

‘Clearance’ processes often grow in process and data scope over time, which means that more and more mandatory process steps to be performed towards the CTC platform will overlap with existing business-to-business transaction automation processes. In addition, since it is inherent in ‘clearance’ setups that a dataset is not recognized for VAT and/or other tax purposes until it has been approved by the CTC platform, the expanding scope of clearance requirement increasingly puts processes between trading partners at risk of delays. Since many supply chains are carefully tuned to incorporate concepts such as ‘just in time’ delivery to manage logistics costs and maximize user satisfaction, this growing dependency on tax administration approval of trading document can be very costly. Common streamlined transaction and booking practices in relation to e.g. intra-group invoices also become much more complex as a result of such requirements. Authorities introduced CTCs should carefully consider these impacts in their design.

CTC platforms as trading hubs In some countries, the CTC platform has been designed not only as a mandatory approval step in the data flow between suppliers and buyers, but as the hub that suppliers and buyers can or must use for data exchange. In Russia and Turkey, for example, the CTC platform must deliver the supplier’s approved invoice to the buyer or its designated service provider. In other countries (e.g. Italy), such delivery by the CTC platform is optional.

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Relationship with periodic and aggregate reporting Many CTC systems, particularly those designed for VAT controls on invoices, continue to be supplemented by aggregate and periodic reporting and/or build on such pre-existing reporting processes or standards. Few countries that have implemented CTCs, even the ones with systems that can today be considered relatively mature, have dropped requirements for the periodic reporting of e.g. accounting ledgers or fixed assets.

Reporting versus clearance: systems impact As noted earlier, the distinction between reporting and clearance CTCs is an important one in terms of impact on business processes.

This distinction is also important from the perspective of enterprise software design. Historically, Enterprise Resource Management (ERP) or ‘accounting systems’ are focused on company-internal data processing, workflow and controls to ensure appropriate management, booking and reporting of core financial and other such system or record data. Such systems are essentially designed around databases which become the formal repository of transaction information – which makes them ideally suited as the source of truth for periodic (including near real-time) reporting of transactional and aggregate data for tax and other formal purposes, but less well suited for submitting transaction data in real time.

Another segment of the enterprise software industry is focused on maintaining business-to-business transactional capabilities between the ERP systems of suppliers and buyers. Typically, such systems can quite easily connect to other e.g. CTC systems to exchange data but they are less well suited for periodic reporting, especially periodic reporting of aggregate data.

Scope: B2B vs B2C transactions While many CTC initiatives so far have focused on business-to-business transactions, it is becoming increasingly common for countries to use similar concepts for business-to-consumer sales. These initiatives occur within a larger context of (often technology-based) measures to increase control over B2C transactions.

Secure cash registers and other offline technologies have been used in many countries for years already, and these technologies are often being adapted to include online submission of consumer sales data on a periodic aggregate basis or in near-real-time for every transaction. Similar concepts are also being introduced for e-commerce sales, which current represent a significant focus for tax and customs authorities worldwide.

CTC systems often employ techniques that leverage consumers to combat fraud in B2C sales such as lotteries among receipt holders to encourage consumers to ask for a receipt, and schemes encouraging or mandating formal consumer identification.

It can also be challenging for a business engaging in retail sales to address the fact that some consumers appear to buy in their private capacity but subsequently expense such purchases with their employer or business customer based on a receipt which may not contain minimum required invoice data. This categorisation problem, among other challenges, is motivating many countries (e.g. Turkey, Argentina, Italy) to look at including consumer receipts or bills in CTC mandates. Such inclusion may apply to all B2C transactions or focus only on certain categories of consumer purchases (e.g. fuel for passenger vehicles).

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The implementation of digital technology including CTCs for increasing tax control over B2C transactions is currently extremely unharmonised. In addition, tax administration requirements and enforcement practices in many countries are not well documented and may not be based on unambiguous legislation. It is becoming urgent to introduce an international dialogue around legislation and practices in this area for online and bricks-and-mortar retail transactions. As in the area of B2B invoices and trading data, one important topic to be considered in this respect – in addition to varying rules for point-of-sale system transaction reporting – are the analogous economic and environmental benefits of retail transactions to consumers using digital instead of paper-based receipts.

Archiving of documents exchanged with a CTC platformMost countries with CTCs have kept the requirement for taxpayers to archive invoices and other transaction evidence, but mandatory storage periods are typically about half of those of counties with traditional post audit systems. Experience shows that even when a country (e.g. Italy) abolishes the requirement for specific taxpayer archiving for indirect tax purposes, taxpayers nevertheless overwhelmingly choose to maintain archives for business workflow and general (including tax) evidence purposes.

‘Hard’ link with logistics/human-readable and printed manifestationsIt is common for regimes that use ‘clearance’ of invoices to require the supplier to issue an authenticated hard copy version of the invoice data (or a subset or adapted version of such data) with an obligation to send this paper document along with physical shipments associated with such an invoice. Law enforcement officers can then cross-check such documents against the database of approved invoices.

Self-billingSelf-billing is a process which is historically allowed in most countries with VAT or similar indirect taxes, whereby the buyer issues the invoice ‘in the name and on behalf of’ its supplier. This type of process is particularly popular in certain industries e.g. car manufacturing, construction, etc. Self-billing can be an important cornerstone of certain business processes (e.g. cases of consignment stock) that CTC platforms should generally support. Self-billing has long been allowed under the tax laws of many countries; however, it should be noted that in some countries it may be restricted or prohibited as such activity would be deemed providing tax advice. Most current CTC systems are not designed to allow trading partners to replicate self-billing schemes. While in most countries having adopted such systems, it is not explicitly prohibited to use a self-billing setup, this would often require cumbersome and hazardous procedures such as the exchange of private signing keys or authentication certificates between the supplier and the buyer.

Future developments & emerging technologiesThe introduction and subsequent evolution of CTCs in many countries comes at a time that ground-breaking new information and communication technologies are becoming commercially available. Artificial intelligence, neural networks, the ‘Internet of things, blockchain and other distributed ledger services, to name but a few, will have a profound impact on businesses, governments and citizens worldwide. Tax and other law enforcement agencies view some of these technologies as transformational to their ability to perform their functions. The impact of the adoption of such new technologies on CTCs is not yet clear, but it is likely, at least in a first period, to create greater diversity among CTC platforms and the way taxpayers interact with them. This risk of even greater divergence

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among CTC systems based on even larger public-sector investments make it more urgent to organize an international dialogue and cooperation between and among the private and public sectors around these topics.

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