The Colombia Direccion de Impuestos y Aduana Nacionales (DIAN) is in the process of rolling out electronic invoicing, starting with its pilot phase in April 2016. Over the past few months, decrees legalizing electronic invoicing and specifications defining its processes have been released. All of this will culminate in a large scale rollout, which we expect to take effect shortly after the pilot, with an anticipated announcement in the summer of 2016 that specifies the catalog of participant companies. Up to 50,000 companies will be impacted by Colombia’s mandate.
With another major economy turning to automation to collect taxes, companies with operations in Colombia need to start preparing for these challenges. And for SAP custodians, the budgeting and project management teams need to start planning now or risk being caught in another fire drill project.
After reviewing the lengthy technical specifications and speaking with end users participating in the process, I have put together an outline of the key business concerns that those managing global SAP templates need to be aware of:
- Folio management will be critical to success in Colombia: Similar to in Chile, the technical key (clave technical) will be a unique identifier that will be able to identify individual business transactions and, ultimately, the VAT due to the government.
- Invoice registration with the government servers is currently being managed under a batch process: Web service registration is required within 48 hours of the billing document create date.
- PDF requirements mean paper is not eliminated: In Latin America, tax processes are designed for efficiency of tax collection and tracking. Therefore, similar to in Mexico and Brazil, there is a very specific PDF design and bar code that represents the human readable form of an invoice. We have had discussions with customers that utilize the PDF as a required document to legally transit goods within the country. The specifications are scheduled to be finalized, but it is important to not just look at the fiscal requirements, but also at the potential impact on logistics.
- Recipient acknowledgment (Acuse de Recibo) is part of the Colombian legislation: This will affect the potential deductibility of VAT on vendor invoices received in country, similar to how it does in Chile and other countries. However, this could also affect how companies recognize revenue or adjust inventory in their SAP system. Will your auditors and process experts state that the true invoice is upon SAP generation, upon government approval (the current best practice) or upon the receipt of the Acuse de Recibo from a customer?
- Record to Report requirements may create a need for new configurations to the general ledger and SAP extractors: Although the current specifications for the pilot have not outlined libros (books) reports, the legislation does require sales (ventas) and purchases (compra) reports be implemented. It is yet to be determined how detailed the DIAN will require reporting to be. The DIAN could simply ask for a list of transactions, or it could require unique identifiers (CUFE and Clave Technica) be extracted with these reports as Mexico has recently done in their eAccounting legislation. Whatever level of detail the DIAN demands will create a need for new configurations to the general ledgers and SAP extractors.
Do not underestimate the amount of work these changes will demand, nor the staff required to implement these specifications. If you are generating a few million dollars per year in Colombia, the difference is significant. The seven other countries that have previously implemented this type of legislation have taught a valuable lesson: start your project planning now.
Click here to get even more insight about Colombia tax reform, including a timeline of events for the implementation of this legislation and a checklist of requirements.