Transactional Implications Beyond LATAM E-invoicing: Tax Reporting

Latin American governments aren’t introducing and expanding e-invoicing mandates at a rapid rate simply to create more data. These invoices are used to support and verify tax deductions, ensuring that the government receives an accurate (and the maximum) amount of tax revenue. Remember, mandated e-invoicing covers all sales and in-country purchased via XML, so the government can have visibility into every single transaction. Now, Latin American governments are introducing accounting mandates that provide even more visibility into tax deductions.

Specific tax reporting requirements vary by country, but be sure that even those countries that don’t currently have strict tax reporting processes are using e-invoices to verify your tax deductions, and will look to the invoices to completely match tax reports in the case of an audit.

Click here to listen to Invoiceware’s recent webinar on tax reporting in Latin America

E-invoicing in Brazil

Brazil mandates the most complex reporting. Using the Public Digital Bookkeeping System (SPED), all companies operating in Brazil must submit their accounting records through a series of federal, city and municipality reports throughout the year.  Under the new ECF regulations, a company must submit a new series of reports to determine profitability at the end of each September. Using this report, the government will analyze net income to ensure tax accuracy. Due for the first time in 2015, penalties range from $500 per month for delayed or incomplete transmissions to up to 3% of sales for inaccurate submissions.

In 2016, these SPED mandates will extend even further when Block K is added to the reporting process. Using this requirement, the government is no longer just looking at sales and purchases, but evaluating inventory (and anything that may be hiding there) as well. Each month, corporations have to provide detailed information on manufacturing, production and inventory control for each individual facility. This data will be used to cross check all payables and receivables with production to look for inconsistencies.

E-invoicing in Mexico

Mexico’s requirements also go beyond sales and purchases, requiring journal entries as proof of IVA tax credits under the eContabilidad regulation. IVA remittances are owed based on the value-added tax (VAT) you charge to customers minus the VAT you pay your suppliers. By forcing you to link the XML to every single deduction, the government can easily check that each deduction is backed by a verified transaction. Penalties can be as high as $3,000 for every journal entry that doesn’t exactly match a valid XML.

In addition to e-invoices, companies operating in Chile, Argentina and Peru must also file Libros reports detailing accounting records at regular intervals, which of course, must match the validated XML invoices for all sales and purchases. These consolidated reports makes it easier for governments to verify the tax owed.

Is your tax reporting automatically linked to your e-invoices and payables inside of your ERP system, or are you creating tax reports outside of your ERP system, risking errors and therefore fines and penalties?

Listen to this webinar to learn more about these requirements and understand the best practices for ensuring compliance.


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