PEPPOL: Transition to the 5-Corner Model

What is PEPPOL?

Imagine a world where businesses across the globe can exchange invoices and procurement documents seamlessly, securely, and in compliance with each country’s regulations. That’s exactly what PEPPOL (Pan-European Public Procurement Online) makes possible.

At its core, PEPPOL is a set of technical standards that facilitates the secure transfer of electronic documents like eInvoices. It ensures interoperability, enabling businesses to trade efficiently while adhering to local and international taxation and regulatory frameworks.

The PEPPOL Infrastructure

Peppol’s infrastructure comprises:

1. Peppol Access Points (APs): Certified gateways connecting businesses to the PEPPOL network. These access points are responsible for sending and receiving documents in compliance with PEPPOL standards. For every transaction, one access point communicates with another to deliver documents securely.
2. Service Metadata Publisher (SMP): A decentralized registry that stores information about access points and the types of messages a recipient can receive. Each participant in the network is assigned a unique Peppol ID, making it easier to locate their data and facilitating secure exchanges.
3. Service Metadata Locator (SML): The central directory that maps each participant to the correct SMP. This ensures that access points can locate the recipient’s metadata, enabling efficient routing of documents.

The 4-Corner Model: PEPPOL’s Foundation

The Peppol network operates based on a 4-corner model involving the sender, the recipient, the sender’s access point, and the recipient’s access point.

• (C1): The Sender — The business initiating the electronic document.
• (C2): The Sender’s Access Point — Transfers the document into the PEPPOL network.
• (C3): The Receiver’s Access Point — Retrieves the document from the network.
• (C4): The Receiver — The end business or entity that processes the document.

Peppol 5-Corner Model: Enhancing the Structure

The 5-corner model builds on the 4-corner framework by adding a fifth entity, known as the intermediary or specialized provider. This additional layer provides greater flexibility, allowing more specialized handling, transformation, and compliance checks that are difficult to achieve in a 4- corner setup.

There are five parties, or corners, to this model:

1. Supplier of the goods or services, generating the e-invoice or at least the key data;
2. Their service e-invoicing provider, which acts as the access point to foward the e-invoice;
3. Buyer’s e-invoicing provider whose access point receives the supplier e-invoice;
4. Buyer who receives the sales e-invoice for processing and payment;
5. (C5): Tax Authorities, usually supported with the service metadata publisher (SMP) a registry that stores the metadata for a document recipient on the Peppol network.

This model is becoming increasingly popular based on business feedback that direct, pre-clearance submission of e-invoices to the tax authorities undermines well-established trade and billing processes. It also creates a single point-of-failure in relying on the tax authority’s portal.

As mentioned above, the 5-corner CTC model introduces a fifth intermediary layer into the existing 4-corner model structure. This additional layer handles continuous transaction controls (CTCs), which include real- time or near-real-time reporting, validation, and compliance processes mandated by government or regulatory bodies. These CTCs ensure that business transactions, especially invoices, are checked for compliance before they are fully processed, minimizing tax fraud and improving data accuracy.

Why is the 5 Corner Model Important?

The 5-Corner Model is gaining traction, particularly in Europe. This model is driven by initiatives like the EU’s VAT in the Digital Age proposal, which discourages traditional clearance systems in favor of more automated and efficient solutions.

Countries adopting or planning to transition to this model include:

• Belgium: Confirmed adoption of the 5-corner model.
• France: Restructuring its e-invoicing system accordingly.
• UAE and Oman: Announced their adoption plans.
• Spain: Planning a transition to this model.
• Singapore: Supporting implementation efforts.

The 5 Corner Model presents both a challenge and an opportunity for businesses. The increasing requirement for business documents, such as invoices, to be formally cleared by governments or approved third parties offers little benefit to businesses and is normally seen as a direct financial burden. Coupled with automated exchange between the service providers, it can help with the automation of invoice issuance and processing across borders.

This automated exchange can bring rise to benefits such as:

1. Real-Time Data Access: Tax authorities can access transaction data instantly, boosting compliance and minimizing fraud.
2. Increased Transparency and Security: Documents are verified and tracked through centralized platforms, ensuring secure exchanges.
3. Standardization and Harmonization: Businesses no longer need to adapt to varying standards. PEPPOL enables seamless communication across borders.
4. Cost Savings: Automation reduces errors, time delays, and manual processes, saving businesses valuable resources.
5. Improved Productivity: Faster processing of invoices and reduced workloads lead to efficient administrative operations.
6. Sustainability: By eliminating paper-based processes, the 5-corner model supports environmental goals.
7. Enhanced Business Intelligence: Data collected through PEPPOL can be analyzed for strategic insights, helping businesses optimize their operations.
8. Simplified Integration: Onboarding new suppliers and customers is easier, fostering better business relationships.

Shortly, Peppol’s 5 corners model offers significant advantages to both businesses and public institutions by making e-invoicing processes more efficient, secure and transparent. The adoption of this model helps to overcome the challenges in international trade, while at the same time increasing the competitiveness of businesses.

Conclusion

Peppol is much more than just an e-procurement system; it reflects how global business communications should be — streamlined, standardised, and seamlessly efficient.

As the digital landscape evolves and businesses continue to seek efficiencies, platforms like Peppol will undoubtedly play an integral role in shaping the future of international commerce. Whether you’re a small startup just making your mark or a multinational conglomerate, Peppol offers benefits that can transform your operations.

Remember that guidance is readily available if you consider taking the Peppol plunge. Expert service providers, like Melasoft, are always at hand to help navigate the network, ensuring you harness its full potential.

Contact Melasoft today to learn how we can help your business thrive.