Invoiceware – Cracking the Code of Latam Tax Compliance Post 1

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Governments are increasingly mandating electronic tax and trade reporting. Leading the way for these initiatives is surprisingly Latin American countries (or maybe not surprisingly, given the tax leakage issues emerging markets tend to have). Forget the U.S. SupplierPay pledge or various U.K. Government efforts to pressure large companies; legislating electronic validations is a game changer.

What started as an e-invoicing requirement in Brazil in 2007 has quickly expanded across the region. At the beginning of 2015, einvoicing compliance is mandated in seven countries, including Mexico, Argentina, Chile, Ecuador, Peru and Uruguay. Word has it that Mexico reduced their shadow economy by 4% in one year by implementing einvoicing requirements with the central tax authorities.

What this mean is that beyond basic commercial compliance that companies do to ensure an invoice is compliant with their purchase orders, good receipts, etc. they must also be fiscally compliant with the legislation to the tax authorities.

Those with any experience in intra-country Latin American manufacturing or retailing are likely aware of the compulsory nature of the move to digital invoicing and tax/government communication and signing. The penalties for non-compliance are stiff, ranging from fines to criminal charges with the prospect of jail time. The reason for these tough requirements is due to specific aims of the country-specific legislation (i.e., to reduce tax evasion, underpayment, and fraud). In other words, the fiscal process must occur before the logistics process.

These regulations are different in every country, region and city. For example, in Brazil, each city uses its own systems (there are over 100!) to calculate taxes for the company.

Invoiceware has developed a Phase I and Phase II strategy that leverages their compliance network and deep understanding of the Latam einvoicing rules. In our next post we will explore Phase I – helping companies comply with these new rules. Phase II is all about Invoiceware and Supply Chain Finance.

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