Governments throughout Latin America take tax collection seriously, and several countries are implementing comprehensive steps to reduce tax evasion, prevent fraud, and maximize their revenues. In fact, Mexico recently withheld more than $384 million in value-added tax (VAT) refunds to three multinationals, including Colgate and Unilever, as it carefully scrutinized their operations. Multinational companies operating in this region need to manage compliance proactively, monitoring trends to determine the next area of operations that will be affected and updating processes accordingly.
Mexico is on the move to collect from multinational organizations, and is using technology to do so. A recent study by Mexico’s tax authority showed that by implementing mandatory electronic invoicing, the Mexico Tax Administration Service (SAT) was able to increase VAT collection by more than 34% in the first half of 2014. Other Latin American countries are following Mexico’s lead, hoping to close leakage and ensure that monies due to the government are fully collected with the help of electronic invoicing mandates. With tax payments becoming a key target throughout Latin America, organizations need to understand how they will configure their SAP accounting systems in order to survive audits and, more importantly, maximize deductions.
With VATs averaging 18% across Latin America, multinationals are contending with millions in tax remittances. And with 10 countries in Latin America now enacting electronic invoicing and integrated VAT reporting to ensure they collect every peso, reais, and penny, now is the time to re-examine a regional platform approach to government compliance. This means ensuring that your SAP systems are prepared to face these new realities of 2016:
- Colombia joins the rank of mandated electronic invoicing. According to its November 2015 announcement, more than 50,000 companies are expected to transition by the end of 2017. Multinationals will definitely be among the first catalog of participants expected to be announced in the coming weeks.
- Mexico continues its enforcement of eContabilidad reporting. Remember that the teeth of this legislation didn’t take effect until September 2015, and many large organizations had Amparos that allowed them to delay their implementations last year. It’s expected that further court cases will advance this legislation. And, of course, there are rumblings of a new CFDI 3.3 e-invoicing standard.
- Peru has mandated that more than 12,000 companies transition to electronic invoicing, with go-live deadlines in both July 2016 and December 2016.
- Uruguay has mandated that all companies with in-country revenue greater than $1.5 Million USD transition to e-invoicing and daily summary reports by December 2016.
- And Brazil, as always, has legislative changes.
Will you be reactive or proactive to these legislation changes? Is your organization fully aware of the effects they will have on your SAP Orders to Cash, Procure to Pay, and Record to Report processes?
Join us for an upcoming webinar on Thursday, February 4th at 2pm ET on the topic of How to manage e-invoicing and tax legislation changes in Brazil & Mexico in 2016 to learn about how to reduce the risk and cost of maintaining compliance, while lowering supply chain costs and improving cash flow across Latin America. The replay will be available via the above registration link post-webinar.
Steve Sprague is the Vice President of Product Strategy for Invoiceware International. He is responsible for both product management and e-Invoicing regulatory updates. Over the last 16 years, he has designed solutions for SAP ERP that deliver out-of-the-box compliance for Latin America and European Union e-invoicing and fiscal reporting requirements.