Invoiceware – Cracking the Code of Latam Tax Compliance – Post 2

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Our previous post looked at how Governments are increasingly mandating electronic tax and trade reporting.

Latam has different business processes than the rest of the world. Other parts of the world should look to copy the Latam process around invoicing. The Government is involved in every transaction twice – first at the time of shipment and than during receipt/payment by the customer.

For example, Kellogg’s Brazilian subsidiary sells to a grocery chain. They must create documents of what they are selling and register with the government. The Government will validate back to Kellogg. Kelloggs can’t ship unless they have this document and that is for every single shipment. This is all done electronically. Now you receive your validated document from the government, you ship your goods, you send that invoice in advance of the goods and print out and put on the truck to prove it is a valid shipment. Your customer gets that invoice electronically in advance and immediately sends back to the Government to let them know the invoice is valid to pay. Once you accept the goods, you accept liability to pay tax.

For a multinational operating in many Latam countries, complying with the above scenario and new rules is both challenging and time consuming. Working with your existing ERP systems (yes there could be multiple ERP systems in place as part of multiple acquisitions), can lead to working with many local third party vendors all over Latam who perform minimal integration with your ERP. This presents a whole new set of issues when not issuing invoices from data not inside the ERP.

And not following the above can lead to expensive fines. There have been several prominent stories around fines in Latam. In Argentina, GE was accused over invoicing by the Government.  Cisco's Brazilian subsidiary has been investigated by the Brazilian authorities as well as a Brazilian importer of their products relating to alleged evasion of import taxes and alleged improper transactions involving the subsidiary and the importer.

Invoiceware’s compliance network is a critical component of their solution. The compliance network data and process information is available directly out of Invoiceware's ERP monitors, so users don't have to leave their ERP environment to execute or view their e-invoices. When it comes to actually enabling e-invoicing compliance, the compliance network first provides validation services to ensure that invoices are compliant to mandatory attributes based on regulatory requirements. Next, it transmits the valid XML to specific tax authorities for review and approval.

Invoiceware’s solution reduces accounts payable and receiving costs. With automated 3-way matching of regional e-invoices, the processing costs associated with accounts payable are reduced. Additionally, suppliers no longer need to inquire about payment status, since status is displayed on the supplier’s portal.

Invoiceware has completed Phase I of their plan with 150+ multinationals as customers connected to 70,000 partners, helping these multinationals comply to various Latin American regulations.

One caveat for companies to be aware of is that many solutions operate as Software as a Service or as they say in the Cloud. Specific countries do not allow computer IP addresses outside the country to do compliance – eg. Turkey, and specific countries require electronic archives to remain in-country (eg. Japan), so it’s important to ask your provider about these issues.

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