Outlook on Latin America: Changes Ahead

Change is a constant when it comes to VAT compliance throughout Latin America. Pioneers in leveraging technology to support electronic data transmission, tax filing and reporting, Latin American countries continue to evolve their regulations to further streamline processes and extract additional data from companies. If your business operates in Latin America, here are some of the initiatives you should be monitoring:

Brazil

Several important compliance mandates will gain momentum in Brazil in 2018, including:

• NFe v4.0 – Launched in 2017, NFe version 4.0 was the largest update to Brazil’s eInvoicing mandate in years. Version 3.1 will be completely sunset on July 2, 2018, so any companies operating on the old version need to make updates immediately.
• REINF – According to the current regulations, all companies in Brazil must submit digital bookkeeping and monthly reporting of withholdings and information on Social Security contributions, based on the following schedule:
  • May 1, 2018, for companies with revenues of more than R$78 million.
  • November 1, 2018, for companies with revenues of less than R$78 million.
  • May 1, 2019, for a third group formed primarily of public entities. A pending amendment is necessary before the REINF requirement for this group takes effect.
• Bloco K – Bloco K requires electronic records of production and inventory, including information related to the usage of raw materials and components. Already enforced for large and mid-sized manufacturers, Bloco K will be rolled out to all companies in Brazil starting January 1, 2019.

Colombia

Effective December 29, 2017, taxpayers are now required to comply with mandates to issue electronic invoices and report them to the Colombian tax administration (DIAN). Taxpayers that were already issuing electronic invoices under the old model for the past five years are the first impacted, including:

• Group 1: June 29, 2018 – Companies that requested numbering ranges (folios) for eInvoicing during the last five years and have a monthly invoice volume less than 3 million.
• Group 2: September 1, 2018 – Large taxpayers, as defined by the DIAN in resolution 076.
• Group 3: September 29, 2018 – Companies that requested numbering ranges (folios) for eInvoicing during the last five years and generate more than 3 million invoices per month.
• Group 4: Jan 1, 2019 – All taxpayers that declare and pay VAT in Colombia.

Costa Rica

The tax administration of Costa Rica recently released the schedule to deploy eInvoicing, which primarily applies to taxpayers providing services in the country:

• January 15, 2018 – Medical-related services
• February 1, 2018 – Accounting services
• March 1, 2018 – Legal services
• April 2, 2018 – Software & computer-related services
• May 1, 2018 – Miscellaneous services

During 2019, a number of retailers will be required to begin issuing and reporting electronic invoices, with a resolution expected to be issued for that purpose by the tax administration during the second half of 2018.

Ecuador

In January 2018, all taxpayers in Ecuador were required to start invoicing under the country’s new offline eInvoicing schema, which presents both benefits and challenges. While this new process gives companies a slight buffer for compliance, it also necessities new processes and continues the zero error tolerance for which Latin America is known. In addition, a significant number of new taxpayers are required to start issuing electronic invoices during 2018.

Mexico

Starting September 1, 2018, companies in Mexico will be required to comply with the Complemento de Pagos, a new process requiring electronic submission of payment receipts. Ultimately, these payment receipts provide real-time visibility for companies and the tax authority alike into invoices paid and pending. However, this new mandate also represents a major challenge, necessitating new SAP extractions and effecting traditional accounts receivable processes. Of course, this new obligation is in addition to the other requirements already in place in relation to electronic invoices (CFDI) in the country, including the Complemento de Nomina (payroll supplement), electronic accounting and Complemento de Comercio Exterior (COMEX – for foreign commercial exports).

Panama

In January, Panama announced its eInvoicing pilot program. The new invoicing system launched February 2018 with 43 companies participating and concludes in August.

Peru

During 2018, Peru is deploying an aggressive plan to add more than 70,000 taxpayers in the country’s mandatory eInvoicing system. The inclusion of these new taxpayers started in January and is expected to end in November 2018, when the last group of taxpayers will be required to issue and report electronic invoices. Peru is also upgrading its eInvoicing platform, deploying version 2.1 of the UBL standard used to process the eInvoicing reports submitted by taxpayers.  

Uruguay

Uruguay introduced a steady stream of changes to its eInvoicing system during 2017, and that tendency has continued into 2018 as well. We expect to see more announcements from the country’s tax authority soon as it seeks to close Uruguay’s VAT gap.