By January 2019, all companies that pay VAT in Colombia will be required to comply with mandatory e-invoicing as the country aims to curb tax evasion and increase collections. However, businesses with operations in Colombia must begin preparing now.
Here are 5 considerations that every company planning their VAT compliance strategies in Colombia should know:
- The DIAN can mandate compliance at any time prior to 2019.
January 2019 is the official e-invoicing launch for all companies in Colombia. However, the DIAN, Colombia’s tax authority, can require select companies to implement e-invoicing under the current model prior to that date. Some companies are already required to comply, and the DIAN will select additional participants based on those it deems most at risk for evasion. Mandated companies will have 6 months to prepare before being required to go live.
- Companies must pass testing and production phases before beginning e-invoicing.
Companies in Colombia must adequately prepare before beginning e-invoicing; it is not nearly as simple as turning on a switch to begin. Invoices, credit notes and debit notes must all pass through the testing and production environments, meaning companies must begin the process well before the date that they are mandated to start.
- Colombia is moving to a PAC e-invoicing model.
In its current e-invoicing model, the DIAN is conducting all validations in batches. However, during the pilot program, it realized that a third-party validation model would be more efficient. As such, the DIAN will launch a synchronous approach with real-time validations, powered by certified, third-party providers like Sovos. This PAC model is similar to Mexico’s approach.
- Currently, only outbound processes are affected.
Though Colombia’s original decree announcing the move to e-invoicing also paves the way for accounts payable and reporting processes, initially the requirement will impact accounts receivable processes. Invoices, credit notes and debit notes must all be submitted within the specified XML format. This phased approach is typical in Latin America, and Colombia will likely expand to outbound process soon after all companies are in compliance with the e-invoicing mandate. Companies should approach compliance in Colombia knowing that e-invoicing is just the beginning of the requirements.
- Specific e-invoicing requirements are similar elsewhere in Latin America.
Colombia had several successful models to follow in determining its e-invoicing approach. Below are some of the primary requirements, which are similar to other programs in Latin America.
- Consecutive number folios
- Digital signature
- Unique identification number (called a CUFE)
- PDF representation with a QR code
- Confirmation/cancellation from the receiver
- Contingencies required
- 5-year archiving
Companies in Colombia need to prepare now for the impending mandates – and the possibility that they will be required to comply before the 2019 launch date – not only to ensure compliance, but also to realize the benefits of e-invoicing.
“If electronic invoicing is mass-ified, there is a savings of 80% in the associated costs compared to the traditional paper invoice. Some people are scared by the initial investment in technology, but a study showed that it recovers in less than two years, because of low paper expenses, storage, internal processes, settlement of tax obligations and others,” said Pierina González Falla, director of supervision for the Dian.