The number of continuous transaction controls (CTC) jurisdictions worldwide is increasing at a high speed. What’s equally interesting to note is a parallel development: countries that already have CTCs in place are expanding the scope of their CTC regimes by introducing new obligations around related document types, notably for transport documents.
We are witnessing a trend through which e-transport documents are becoming a companion to, or an integral component of, many CTC systems. Here is why:
The rising popularity of e-transport documents
The transport document is issued to accompany goods during transport and provides proof of the transfer.
Transport documents and invoices have much information in common. Therefore, transport documents are usually designed to link the invoice data that is reported or approved in a CTC procedure, thereby creating control options for the physical supply chain from transaction verification mechanisms embedded in the financial supply chain. As a result, they eventually contribute to the tax authority’s ability to assess the physical reality of taxable transactions by comparing data received through e-invoice and e-transport document systems.
The use of QR codes, radio frequency identification and cameras as control mechanisms
Some jurisdictions require QR codes to be present on e-transport documents to easily check if the vehicle transporting the goods is stopped for control. However, there are even more sophisticated methods to verify the transport of goods in some countries.
In India, under certain circumstances, transport vehicles must carry Radio Frequency Identification (RFID) tags that include item classification, destination and vehicle details furnished at the time of the e-way bill generation. This tag then is read by the cameras on the road, allowing cross-verification of the details of the vehicle movement specified in the e-way bill with their physical movement. This system helps the tax administration to detect non-compliant behaviour while having better visibility and greater precision to check tax evasion.
It is foreseeable that e-transport document obligations will become more common in particularly CTC jurisdictions. This is because of the ability to leverage the tax authority’s platform to receive more data and use it for comparison. Considering the pace of broadening of CTCs, the primary need of most businesses will be sustaining data consistency and reconciliation. To stay compliant, taxpayers must ensure that their processes are flexible and compatible with changes that the tax authorities are introducing.
With coverage across more than 70 countries, Sovos can help relieve the burden of tax compliance. Contact our team to discuss your CTC requirements.