This blog was last updated on March 1, 2024
E-documents or electronic documents are rapidly growing in usage across businesses of all shapes and sizes, in countries around the world.
While the automated exchange of e-documents is a relatively new phenomenon which is being adopted on a country-by-country basis, there is basic universal information that your business would benefit from understanding – and potentially utilizing.
This blog will serve as your one-stop shop for required e-document knowledge.
What is an e-document?
An e-document is an electronic transactional document or message and is typically used in an automated business process.
As the digitisation of business accelerates, so too does the use of electronic documents – whether that be an electronic invoice sent in real-time to a national tax authority or an electronic goods receipt note exchanged between companies.
The difference between electronic documents and other digital documents such as PDFs is that e-documents are machine-readable and are generally exchanged by online platforms or software.
That said, there are numerous types of e-documents and there is little standardisation as each country has its own stance and potential mandate on their adoption. The European Union has long been working on its approach to e-documents for increased interoperability with definitions and rules as part of its efforts under the eGovernment Action plan and eIDAS regulation to facilitate digital transactions and services in the EU.
In addition, the UK recently adopted the UK’s Electronic Document Trade Act which is a huge step towards the digitization of trade documents and potentially paperless global trade.
Types of e-documents
There is a wide variety of electronic documents to suit a number of applications across business, helping to streamline workflows and operations, facilitate cross-border trade and save on costs.
E-document mandates in Turkey, for example, include:
- E-invoice
- E-arsiv invoice
- E-ledger mandate
- E-delivery note
Other electronic documents that are used in some countries include:
- E-purchase orders
- E-credit & e-debit notes
- E-goods receipt notes
- E-payment instructions
There has been a notable implementation of e-documents in transport in recent years, with the likes of Romania adopting a system that requires taxpayers to use an electronic waybill system to obtain clearance of the transport document before the transport of goods begins. Read our dedicated blog to find out more about the global rise of e-transport documents.
One particular e-document that has had an exponential rise in utility over the past few years is the e-invoice. Electronic invoices have grown in popularity as countries develop their continuous transaction controls (CTC) and e-invoicing regulatory obligations. The likes of France, Spain and Poland all plan to introduce e-invoice mandates, requiring taxpayers to send invoices electronically.
Read our comprehensive e-invoicing guide for more information.
Why use electronic documents?
There is a host of reasons that electronic documents can be beneficial, which explains why tax administrations globally are implementing e-document mandates.
A primary reason for the use of e-documents is that they generally allow for the automation of workflows, increasing safety, accuracy, transparency and cost-saving for the involved parties. Automating the process of generating and exchanging documentation reduces the risk of error, allows for seamless transmission of information (including to tax authorities who seek greater transparency) and reduces the reliance on paper (providing an environmental benefit).
Another reason businesses use electronic documents is simply because they are mandated to do so as part of tax digitization controls. An increasing amount of tax authorities are making it an obligation to send documents electronically, and facing a penalty due to non-compliance is not desirable. As CTC regime adoption grows, so too does the need for businesses to meet their new e-document obligations.
Compliance conditions of e-documents
The compliance conditions of e-documents vary depending on the national rules, but there are some typical conditions across regimes.
In the context of tax digitization controls, the conditions that apply to some of the most regulated e-document types, such as the e-invoice, include:
- Following a specific document format (as dictated by the relevant authority)
- Ensuring authenticity and integrity (through the use of e-signatures or other validation methods)
- Using the tax authority’s designated online platform or software for transmission
- Archival of e-documents for a specified period of time and by implementing certain security measures
- The recipient must consent to receiving electronic invoices (unless e-invoicing is mandated)
- Producing and storing system documentation describing the e-invoicing/archiving system and process
What’s the difference between a digital document and an electronic document?
The difference between electronic documents and digital documents is a hot topic. It’s easy to get confused between the two considering that “digital” and “electronic” are used interchangeably by many, but it’s important to understand the difference.
Digital documents are often a digital analogue of a physical document – think a scanned document, photograph, or PDF – and oftentimes are simple for people to read and digest. An example of a digital document would be an invoice sent as a PDF via email.
Electronic documents are files of data that are generated by and for computers, making them hard for people to read due to their formatting. Such data – like that seen in a structured e-invoice (e.g. XML) – is meant to be sent from one system to another without interference from humans.
How Sovos can help
Sovos’ software allows businesses to manage CTC obligations, including e-invoicing compliance and archiving.
As the world continues its digitisation, it’s important to stay on top of evolving regulations and to keep up with best practices for your business. Working with Sovos, your business can:
- Automate processes
- Reduce the cost of compliance
- Minimise the need for ad hoc IT involvement
- Stop worrying about ever-changing formats, processes and obligations
- Increase efficiency by saving time, eliminating manual updates and enhancing accuracy
Find out more about Sovos’ CTC solutions.
