It is not new that mandatory e-invoicing has flourished with notable strength in the recent history of taxation in Latin America. Ten or so years ago, the Latin American countries understood how technology could be of much assistance in fighting tax evasion, a well-known historical problem in that region, while also driving standardisation to support automated business processes. Paraguay, paying close attention to its neighbor countries Chile, Mexico, Brazil, Ecuador, Colombia and Peru, has announced to follow them in the same direction.
Paraguayan 4 stage implementation of mandatory e-invoicing
Last April, the tax authority in Paraguay presented its project to require electronic invoicing from local taxpayers. The plan was to be implemented in several stages:
- Model definition according to the country’s needs;
- The Development phase establishing legal and technical framework;
- Implementation with a pilot project;
- Gradual expansion to all taxpayers.
According to some local sources, the tax authority seems to have completed stages 1 and 2 and aims at implementing a pilot program during March 2018 with 23 companies to test the new framework. To meet this objective, the legal and technical framework must be formally approved. To this date, the model has been presented to the executive branch of government, but the decree required to approve the model and lay out the legal rules for issuing electronic invoices is still pending.
An ambitious schedule towards mandatory e-invoicing
The official schedule that is guiding the activities of the tax authority sets a target date for issuing the decree during the third quarter of 2017, which has not been met. In addition, the authorities are aiming at issuing the regulation of the decree during the first quarter of 2018, while the second quarter is when the pilot program will be launched. It is yet to be seen if this ambitious schedule is fully met, especially considering that one deadline has already elapsed, but leveraging the experience of other countries could help Paraguay to catch up.
Technically, the infrastructure to support the implementation will be deployed during 2018 to enable extensive testing throughout the project pilot. In addition, the second half of 2018 and part of 2019 will be reserved for the implementation of a free solution for small taxpayer’s use and to open the system to other corporations that join the new e-invoicing system, either through voluntary request or as part of the first wave of mandates (part of the gradual expansion to all taxpayers). While still too early to take these plans as conclusive, it is expected that full e-invoicing mandate will be adopted through four stages of mandate expansion.
Are we looking at a clearance model for Paraguay?
It is worth noting that there are yet no details about the specific features of the e-invoicing model under development. LATAM countries are natural adopters of clearance models in the area of indirect taxation management. In addition, recent examples such as Peru or Colombia suggest that tax authority clearance, the use of xml schemas and digital signatures are rapidly becoming a standard in the region.
Considering the speedy implementation of e-invoicing mandates in LATAM countries such as Colombia who is moving from a post-audit system into a clearance one, it seems feasible that Paraguay will meet its goals as per the schedule above, especially considering that the tax authority seems to be committed to the task.