The State of Regulatory Compliance: Latin America Charts the Course for Intelligent Compliance

Oscar Caicedo
June 20, 2017

Last week, Sovos issued a new report covering The State of Regulatory Compliance, which details the evolution of technology-driven regulatory trends, as well as how businesses can proactively prepare for the new wave of global compliance obligations. Not surprisingly, the report shines a spotlight on Latin American governments who first introduced initiatives giving governments more visibility into business transactions.

Today, those initiatives are quickly being adopted across the globe, specifically in Europe. Here’s a sneak peek at some of the major Latin American compliance initiatives that European countries are now leveraging: 

Transaction-level reporting: Latin American countries, particularly Brazil and Mexico, pioneered government visibility into individual business transactions through their e-invoicing measures, which were launched a decade ago. Now, 24 countries across the globe require some level of transaction-level reporting, including Hungary, Spain and Turkey. Governments are approaching reporting requirements in two ways:

  • Post-transaction processes – Companies required to submit invoices or invoice data must do so after the transaction concludes. Mexico led this approach to ensure accuracy for retail transactions and now Spain is rolling out its Immediate Information System process, beginning July 2017.
  • Real-time transaction processes – This approach requires government validation for transactions as soon as the event occurs. Without this validation, the invoice cannot be sent to the buyer and in some cases – goods cannot be shipped.

Cross-border initiatives: Several Latin American countries have forged agreements to share taxpayer insights to ensure that accurate taxes are paid for cross-border transactions. Similar initiatives are starting to go global. Examples include:

  • The Common Reporting Standard (CRS) – 100 jurisdictions worldwide have agreed to this reciprocal exchange of information about accounts held by individuals with a tax residency in a different jurisdiction. Participants include Belgium, Brazil, France, Germany, Italy, Mexico and the U.K.
  • The Base Erosion and Profit Shifting (BEPS) Action Plan – a new reporting standard under which multinational organizations must provide detailed financial and tax information on the global breakdown of their income and taxes. The U.K., Spain, Mexico, the Netherlands and Poland are among the approximately 50 countries passing BEPS requirements.

Rolling and automated audits: With new levels of data acquired continuously, governments have the ability to detect tax reporting errors more frequently, often in real-time, and automate the audit process. Mexico is currently the gold standard in audit automation, but European countries are introducing new standards to better facilitate audits. The Standard Audit File for Tax (SAF-T) is a process common in the E.U. that facilitates the transfer of tax reporting information from companies to relevant authorities, requiring companies to provide governments with full transparency on business transactions.

These trends tell us one thing – that Latin America is pioneering the future of compliance, and countries around the world are quickly catching up. Businesses must embrace automation and centralization to avoid greater risk and ensure accurate compliance with global initiatives.

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Download our State of Regulatory Compliance eBook to learn how regulatory trends such as these are taking hold around the globe.

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Author

Oscar Caicedo

As vice president of strategy and operations for VAT Americas, Oscar Caicedo sets market and product direction across continuous transaction controls, reporting and tax determination. In this role, he leads groups of dedicated subject matter experts across the Americas region. Oscar brings more than a decade of experience leading consulting and implementation teams focusing on data integration and regulatory requirements. He is an industry recognized expert in digital transformation and electronic tax solutions. Prior to Sovos, Oscar spent more than four years at Invoiceware, which was acquired by Sovos in 2016. Oscar has managed complex implementation projects for many of the world’s most recognizable brands. He holds a Bachelor of Business Administration degree in business economics from Georgia State University.
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