Any eEconomic crisis is like a snowball—growing and gaining speed and endangering everyone in its path. Access to credit is reduced, people cut their discretionary spending and businesses experience a slowdown and stop investing. Unemployment grows and as fewer transactions are performed, fewer taxes are paid.
In such high-pressure situations, some businesses may feel compelled to reduce their tax expenses through unconventional practices. And so it is inevitable that the impact eventually reaches the government. Very much accustomed to this scenario, Latin American governments have become creative on fighting tax evasion to ensure their tax revenue is as minimally impacted as possible.
Brazil, for instance, has a project called the “Public System of Digital Bookkeeping” which started in 2006 and imposes several control mechanisms on business taxpayers. Currently, every invoice must be issued as an XML file and submitted for evaluation by Brazilian tax authorities, who assess such details as the legal status of the issuer and the receiver, and whether the due taxes were correctly applied and calculated.
If all the information is accurate, the authorities will authorize the invoice and give it an official number. By then, the government knows how much tax revenue it is due on that transaction and who will have to pay the bill. The Brazilian tax authority now accounts for more than 3.8 million e-invoices issued and has more than 760,000 businesses registered as issuers.
In Mexico, the electronic revolution began in 2004 with the introduction of the “Fiscal Digital Receipt.” Although adoption moved slower than in Brazil and some transactions are still excluded from the digital process, it is now a compliance obligation for most companies doing business in the country. The Mexican government also makes use of digital means for the tax filing process.
One mandate is the Declaración Informativa de Operaciones con Terceros, or DIOT, which requires that all Mexican value-added tax (VAT) taxpayers file a monthly form listing all paid bills per taxpayer. Since its 2011.2 release, NetSuite has provided out-of-the-box support for the DIOT requirement through its Tax Audit Files feature, enabling companies to streamline compliance.
Other Latin American countries are moving in the same direction. Argentina, Chile, Colombia, Costa Rica and Ecuador also have their versions of facturación electronica. The process varies from one country to another, with different file layouts and formats, synchronous and asynchronous communications, contingency procedures and digital signature requirements. A group of multinational companies doing business across the Mercosul region of South America has been discussing the adoption of a single format and process, but that has yet to come to fruition.
NetSuite provides multiple “out-of-the-box” compliance features, such as individual sequenced transaction numbering, full audit trail, completely configurable role-based access and permissions (which allow for a segregation of duties that fit each and every business), VAT tax reports for more than 40 countries and many others.
NetSuite see opportunities to help businesses meet their global e-obligations and, with the help of our local SDN partners, we have already delivered electronic invoicing integration for some of the above-mentioned countries. If you are conducting or planning business in Latin America, you should be aware of the ever-changing laws and explore how NetSuite can help you achieve regulatory compliance painlessly.
- Matheus Carvalho, Localization Product Manager – Latin America