Brazil has plenty of tax rules and mandates to consider, but compliance doesn’t have to be strenuous. Knowing your organisation’s obligations and what each requires of you is vital – that’s why this page exists.
This overview guides you through the different taxes in Brazil, from state VAT to federal VAT, municipal service tax and federal social contribution. Compliance starts here.
Due monthly, deadline is dependent on the type of business activities carried out
Federal VAT return
Due on the 15th day of the second month following the month the taxable event(s) occurred
VAT rates
17% 12% 7% 0%
VAT rules in Brazil
There are multiple taxes that organisations in Brazil need to be aware of. Here’s a simple rundown.
Brazil e-invoicing
There are several types of electronic invoices in Brazil, with e-invoicing mandatory for B2G and B2B transactions. If your organisation is established in Brazil, you must issue and receive electronic invoices when dealing with businesses or public administration entities.
Known as ICMS, Brazil’s state VAT is levied by individual states. Each state determines tax rates, though the tax generally applies to:
Imported and national goods
Transportation services between states and municipalities
Communication services
Electricity supply
Federal VAT (IPI)
There are several types of electronic invoices in Brazil, with e-invoicing mandatory for B2G and B2B transactions. If your organisation is established in Brazil, you must issue and receive electronic invoices when dealing with businesses or public administration entities.
Known as ICMS, Brazil’s state VAT is levied by individual states. Each state determines tax rates, though the tax generally applies to:
Imported and national goods
Transportation services between states and municipalities
Communication services
Electricity supply
Federal Social Contribution (PIS-PASEP and COFINS)
PIS-PASEP and COFINS are federal social contributions levied on the monthly gross revenue of organisations. While exports are exempt from these taxes, imports fall under the rules – though tax rates vary based on each organisation’s activities.
Requirements to register for VAT in Brazil
For non-residents of Brazil, the requirements for VAT registration are simple.
Non-resident businesses cannot register for VAT in Brazil without a permanent establishment in the country, and all supplies of goods or services meet the tax threshold for at least two of the four VAT types – meaning registration is necessary for any organisation doing business in Brazil.
However, the country’s tax authorities have yet to implement VAT on cross-border supplies by foreign organisations to consumers who have not registered for VAT (B2C).
Invoicing requirements in Brazil
Generally, any product or service sale must be accompanied by an invoice. Brazil requires businesses to register in a state by joining the National Registry of Legal Entities (CNPJ).
Electronic invoice (NF-e) – for providing goods of service
Electronic service invoice (NFS-e) – for providing services
Electronic consumer invoice (NFC-e) – for B2C transactions
Each invoice requires specific information to be valid, and this includes:
CNPJ number
Address of both the issuer and recipient
Product code, description and quantity
Unit value and tax details
Valid digital signature
In Brazil, an electronic invoice must be presented in structured XML format and validated by the Brazilian tax authorities before it is issued to the buyer.
Penalties for non-compliance with VAT in Brazil
Failing to comply with Brazil’s VAT rules can be costly for taxpayers. There is a dramatic range for fines, ranging from 1% to 150% – though the regular penalty cost is 75% of the tax due to the authorities.
In Brazil, as a rule, for example, there are assumptions of withholding taxes, in the case of the Tax on the Movement of Goods and Services (ICMS), provision in ICMS Agreement 142/2018 and, as for the Tax on Services (ISS), provision in article 6, Complementary Law 116/2003.
There are different deadlines for the two types of VAT in Brazil:
ICMS: These returns are due monthly, with the deadline dependent on the type of business activities carried out
IPI: Returns must be submitted monthly through the DCTF declaration, due by the 15th day of the second month following the month the taxable event(s) occurred
Brazil’s VAT number, Cadastro Nacional de Pessoa Juridica (CNPJ), is a unique identification number assigned to organisations after registering for VAT.
There is no threshold for VAT liability in Brazil. If a business supplies goods or services that are subject to one or more of the country’s taxes, then it must register for VAT.
Solutions for VAT compliance in Brazil
With the numerous taxes in Brazil, compliance can be complicated. Sovos is your ideal compliance partner – not just now, but as the country’s tax rules develop over time.
We combine local tax expertise with global solutions, ensuring compliance wherever you do business. This allows you to focus on what matters.
Complete the form below to speak with one of our e-invoicing experts
Postponement of EFD-REINF Deadline for Events Referring to Withholding IRPF, CSLL, PIS and COFINS
The publishing of Normative Instruction RFB n. 2.133, of 27 February 2023 postpones the deadline of the obligation to submit EFD-REINF (Digital Fiscal Record of Withholdings and Other Fiscal Information) events related to withholding:
IRPF (Personal Income Tax)
CSLL (Social Contribution on Net Income)
PIS (Social Integration Program)
COFINS (Contribution for the Financing of Social Security)
This postponement refers to taxpayers who are currently obliged to submit the DIRF (Withholding Income Tax Return) and were required to comply with the EFD-REINF obligation from March 2023.
The obligation to submit the EFD-REINF for these taxpayers will now begin from 8:00 am on 21 September 2023, in relation to taxable events that occur from 1 September 2023.
The postponement is to allow time for taxpayers to carry out adjustments to their computerised systems and for the Brazilian Federal Revenue Agency to finalise the necessary tests to guarantee the consistency of the rules for validating the information captured in the record.
Since 2007, the Brazilian government has imprinted high efforts in digitizing the relations between revenue offices and taxpayers, by introducing electronic instruments to ensure taxpayers provide accurate and timely information on the collection of the various existent taxes, duties, charges, and contributions.
One result of such efforts was the creation of the Public Digital Bookkeeping System (Sistema Público de Escrituração Digital) or SPED. This platform is where taxpayers submit fiscal and accounting information using different electronic instruments referred to as SPED modules.
There are significant upcoming changes to one of the modules, the Digital Fiscal Record of Withholdings and Other Fiscal Information (Escrituração Fiscal Digital de Retenções e Outras Informações Fiscais), known as EFD-REINF.
The latest regulatory updates within this module concern steps towards the substitution of other records by the EFD-REINF, with important changes taking place in 2023.
Main changes in the EFD-REINF
In August 2022 version 2.1.1 of the EFD-REINF layout was introduced, expanding the reach of events covered by the record. The current 1.5.1 version is valid until February 2023 and from March 2023 layout version 2.1.1 must be used.
The main change is the inclusion of the ‘R-4000’ series events. These events cover the registration of withholdings on income tax (IR), Social Contribution on Net Income (CSLL), Social Integration Program (PIS), and Contribution to the Financing of Social Security (COFINS), among other fiscal contributions.
Another relevant change is the removal of the requirement to submit the EFD-REINF ‘without movement’. Previously, only a certain group was permitted for this exemption if they didn’t generate any records to be reported in the respective declaration period but this has now been expanded to all taxpayers in scope of the EFD-REINF.
New obliged taxpayers
Earlier this year, RFB Normative Instruction n. 2.096 of 2022 postponed mandatory submission of the EFD-REINF for the fourth and last group of taxpayers: entities that are part of the ‘Public Administration’ and entities classified as ‘International Organisations and Other Extraterritorial Institutions’. Since August 2022 this group is now obliged to comply.
However, the same regulation established that from 1 March 2023 taxpayers currently obliged to submit the DIRF (Withholding Income Tax Return) will be required to comply with the EFD-REINF obligation. This is an extensive list found in article 2 of RFB Normative Instruction n. 1.990 of 2020, which includes individuals and legal entities that have paid or credited income for which Withholding Income Tax (IRRF) has been withheld and certain entities of the Federal Public Administration, among others.
Finally, the annual submission of the DIRF will be abolished regarding events that occur from 1 January 2024, meaning that taxpayers won’t be required to submit it in 2025. Until then, the information declared in the DIRF and EFD-REINF will coexist.
Compliance challenges
Keeping up with the mosaic of fiscal requirements within the federal, state, and municipal levels in Brazil normally requires engaging the services of an expert or risk incurring high penalties. Modifications to fiscal obligations are implemented regularly in the country, which means companies must ensure readiness to comply.
A complement to eSocial (which covers tax withholdings on wages), EFD-REINF reports withholdings made to individuals and corporations resulting from the application of the income tax and social security taxes (CSLL, INSS COFINS, PIS/PASEP). It also applies to payments received by sport associations and revenues generated by sport events.
EFD-REINF replaces reporting obligations that the Brazilian taxpayers have to comply with under the EFD-Contribucoes.
Who must comply?
Legal entities:
That provide and contract outsourcing services in accordance with art. 31 of Law No. 8,212 of July 24, 1991
Who are responsible for withholding the social security taxes PIS/Pasep, the Cofins and the CSLL
Opting for payment of social security contribution on gross revenue (CPRB)
Entities considered rural producers and agro-industries when subject to substitutive social security contribution on the gross revenue from the commercialization of rural production
Sports associations that have professional soccer teams receiving revenues related to sponsorship, licensing of use of brands and symbols, marketing, advertising and broadcasting of sports shows
Sponsors that provide resources to those sports association
Entities marketing any sport event held in Brazil, involving at least one sport association that owns a professional soccer team
Entities and individuals that have paid or credited income on which the federal income tax has been withheld by themselves or as representatives of third parties
How is the EFD-REINF structured?
There are three groups of reports, or “events,” that must be submitted to the tax administration:
Table Events (Eventos de Tabela): Intended to optimize and validate the information that identifies the taxpayer and some administrative and legal processes that may affect them (if they exist).
Non-Periodic Events (Eventos Não Periódicos): Information related to transactions that do not occur on a regular basis and therefore should only be reported when they occur.
Periodic Reports (Eventos Periodicos): Events related to periodic information that should be reported on a regular basis by the taxpayer. These include:
Withholdings for Social Security tax for services received
Withholdings for Social Security tax for services provided
Revenues received by sport associations
Revenues Transferred by sport associations
Social Security tax on gross receipts
Withholding taxes (IR, CSLL, Cofins, PIS/PASEP)
When does it go into effect?
The EFD- REINF is being rolled out in three stages.
May 1, 2018: Companies with revenues greater than 78 million Real annually
November 1: Companies with revenue less than 78 million Real
May 1, 2019: All public entities
What are the penalties for non-compliance?
Events that are incomplete, or reported with errors, will a face fines totaling 3% of the amount involved, with a minimum of $100 Real in the case of legal entities, and half of the above amounts when the taxpayer is an individual. Fines for late reports will range between from $500 Real to $1,500 Real per month or fraction of month.
Brazil is known for its highly complex continuous transaction controls (CTC) e-invoicing system. As well as keeping up with daily legislative changes in its 26 states and the Federal District, the country has over 5,000 municipalities with different standards for e-invoicing.
The tax levied on consumption of services (ISSQN – Imposto Sobre Serviços de Qualquer Natureza) lies under the competence of the municipalities. Each municipality has authority over the format and technical standard of the services e-invoice (NFS-e – nota fiscal de serviço eletrônica). This poses a significant compliance challenge, as e-invoicing is mandatory for nearly all taxpayers in the country.
However, important steps have been taken towards changing this scenario. An agreement (Convênio NFS-e) recently signed by the Brazilian Federal Revenue Agency (RFB), the National Confederation of Municipalities (CNM), and other relevant entities, has established the National System of the NFS-e with a countrywide unified standard for the services e-invoice.
The National System of the NFS-e (SNNFS-e)
The SNNFS-e introduces a unified standard layout for the issuance of the NFS-e, as well as a national repository of all e-documents generated within the system. Adhesion to the system is voluntary for municipalities. Since the bill proposed to regulate this issue (PLP 521/2018) has been static in Congress since 2019, the agreement was designed to allow municipalities to voluntarily adopt the national standard, which then becomes mandatory for taxpayers.
The system will allow issuance of the NFS-e in a national standard, through the web portal, mobile app or API (application programming interface). It also creates the National Data Environment (ADN), the NFS-e unified repository.
The SNNFS-e offers several service modules and municipalities can choose which ones to adopt. The ADN is the only mandatory module, as it ensures the integrity and availability of information contained in the documents issued is in the unified standard. Additionally, the ADN allows adhering municipalities to distribute issued NFS-e among themselves and taxpayers.
Once the agreement is signed, the municipality must activate the system within a certain deadline, which hasn’t been established. Activation involves configuring system parameters and amending municipal legislation to reflect the national system requirements. Only after complete activation will taxpayers be able to issue invoices based on the unified standard.
Technical documentation of the NFS-e has also been released, but these are not the definitive specifications, which are still to be approved by the National Standard Electronic Service Invoice Management Committee (CGNFS).
What this means for businesses
The NFS-e national standard provides substantial simplification of taxpayers’ e-invoicing obligations. With a standard layout, compliance with multiple formats can be drastically reduced. The document format for issuance of the standard NFS-e is XML and it must be digitally signed.
Another benefit is that one of the available modules allows taxpayers to pay the ISSQN owed in several municipalities at once, using one single document (Guia Única de Recolhimento) issued by the system.
Although municipalities may choose to keep their current NFS-e issuance system, they must still adhere to the communication deadlines, layout, and security standards of the national NFS-e. They must also ensure transmission of all issued documents to the national data environment. This ensures that taxpayers will only be required to issue the NFS-e in one standard layout.
What’s next for e-invoicing in Brazil?
The first phase of production started on 23 July 2022 with five pilot municipalities. Transmission will be available through different methods, with gradual implementation. According to the initial implementation schedule of the National Confederation of Municipalities, API transmission is set to happen from mid-October 2022 or later, depending on the stability of the other transmission methods. Further development of this schedule can be expected in the coming months.
São Paulo, Salvador, and Florianópolis are among the many municipalities that have already signed the agreement. The success of this national NFS-e standard relies on significant adoption by municipalities, so taxpayers must ready themselves to comply as this takes place across the country.
Take Action
Need to ensure compliance with the latest e-invoicing requirements? Get in touch with our tax experts.
Update: 12 September 2023 by Robson Satiro de Almeida
Tax Reform in Brazil: Simplification Statute Published
Recent developments in Brazil indicate changes on the horizon, as the country continues to move towards a tax reform for simplification of e-invoicing obligations.
A significant reform of ancillary tax obligations is underway aiming to create a unified system for issuing tax documents. The government has long anticipated and discussed this project, but it now shows promise of becoming a reality.
The Brazilian government published Complementary Law no. 199 (Lei Complementar no. 199) in August 2023, establishing the National Statute for the Simplification of Additional Tax Obligations (the Statute). The Statute derives from Draft Law Proposal no. 178/2021 and seeks to streamline ancillary tax obligations, including filing tax returns, keeping accounting records and issuing electronic invoices.
What will change in e-invoicing?
The Statute’s primary change provides the unification of rules for issuing electronic invoices and fulfilling other ancillary obligations. There are currently more than a thousand different electronic invoice formats throughout the country, driving up business maintenance costs and resulting in adversities in company budgets.
Specifically, the Statute establishes integrated action at the Federal, State and Municipal levels to reach the following:
Unified issuance of electronic tax documents
Use of e-invoicing data to calculate taxes and provide pre-filled tax returns
Simplification of tax and contribution payments by consolidating collection documents
Centralisation of tax records and their sharing in accordance with legal mandates
How will changes occur?
To achieve unified e-invoice issuance and integration of other ancillary obligations, the government will assess existing systems, legislation, special regimes, exemptions and electronic tax platforms. The next step is to standardise legislation and the respective systems used to fulfil such obligations.
As per the Statute, this integration effort aims to provide benefits such as:
Cost savings for taxpayers
Encouraging taxpayer adherence at all federative levels
Modernising systems and digitalising operations
The Statute also creates the National Committee for the Simplification of Ancillary Tax Obligations (CNSOA) to establish and improve the processes for simplifying tax obligations in line with a definition of a national standard process. However, the Union, States, Federal District and Municipalities may establish additional tax responsibilities related to their respective taxes, if they are aligned with the CNSOA provisions.
What’s next?
After formal composition of the National Committee, the Federal Executive Branch must adopt the necessary measures to allow it to carry out its activities as defined in the Statute. This is essential to start the official move towards national unification of e-invoicing processes and other ancillary obligations.
Additionally, the National Congress will still analyse and vote on certain points of the Statute that the President vetoed, which could result in further alignment or changes within the National Statute for the Simplification of Additional Tax Obligations.
Starting to prepare for eventual changes with e-invoicing in Brazil? Sovos can help.
Update: 21 March 2022 by Kelly Muniz
Brazil is, without doubt, one of the most challenging jurisdictions in the world when it comes to tax legislation. The intricate fiscal system that encompasses rules fromhttps://sovos.com/vat/tax-rules/brazil-e-invoicing/ 27 states and over 5000 municipalities has created a burden on companies, especially for cross-state and cross-municipality transactions.
Furthermore, taxpayers must carefully examine the numerous e-invoicing formats and requirements (and, sometimes, the lack of such). Therefore, hopes for tax reform in Brazil have existed for quite some time.
Simplifying e-invoicing compliance
In recent years, several legislative initiatives towards integrating indirect taxation mandates across the country have not met successful outcomes. Meanwhile, a feasible step into bringing forth such changes may be through the unification of rules on digital compliance with tax obligations, such as VAT e-invoicing and e-reporting.
In late 2021 a draft law proposal (Projeto de Lei Complementar n. 178/2021) was initiated by the private sector. Named the National Statute for the Simplification of Ancillary Fiscal Obligations, it has been welcomed this year by the House of Representatives. Its primary purpose is to introduce a significant reform within digital tax reporting obligations by creating a unified e-invoicing system.
By establishing national fiscal cooperation, the proposal intends to reduce costs with compliance, allow information sharing among tax authorities, and create an incentive for taxpayers’ conformity across all federal, state and municipal levels.
The principal agenda of the draft law proposal is to introduce:
A unified national standard for e-invoicing
A unified e-bookkeeping format, the Digital Fiscal Declaration (DFD)
A pre-filled tax return using e-invoice data
A unified fiscal registry file and information sharing system (RCU)
What this means for businesses
The most significant change is the introduction of the NFB-e (Nota Fiscal Brasil Eletronica), a national standard for e-invoicing. It entails the unification of the NF-e (Nota Fiscal Eletronica), NFS-e (Nota Fiscal de Servicos Eletronica) and NF-C (Nota Fiscal do Consumidor Eletronica) in one single document. This will cover Brazil’s VAT-like taxes, in this case, ICMS (VAT on products and certain services) and ISS (services VAT).
In practice, this means that instead of complying with numerous e-invoicing formats and mandates, according to the state and municipality of the transaction, one national digital standard will provide uniform country-wide compliance for e-invoicing. The NFB-e will cover invoicing of goods and services on state and municipal levels for B2G, B2B and B2C transactions.
The reform will drastically reduce the burden on taxpayers and expand the scope of e-invoicing to municipalities where such a mandate hasn’t been adopted yet.
It’s essential to add clearance requirements for e-invoicing in Brazil will be maintained, meaning that businesses will still need to comply with rules for real-time clearance of invoices with the tax authority.
What’s next?
The draft law proposal is still in early discussions and will follow to the Justice and Citizenship Constitutional Commission (CCJC) for approval and possible amendments before voting by Congress. Until then, compliance with e-invoicing rules across Brazil remains at its current challenging status.
Take Action
Need to ensure compliance with the latest Brazilian e-invoicing requirements? Speak to our team or download Trends Edition 13 to keep up to date with the latest regulatory news and updates.
TRENDS AND UPDATES ON VAT COMPLIANCE
Trends 13th Edition 2022
TRENDS AND UPDATES ON VAT COMPLIANCE
Trends 13th Edition 2022
Welcome to the 13th edition of Sovos’ annual Trends report where we put a spotlight on current and near-term legal requirements across regions and VAT compliance domains.
This report provides a comprehensive look at the regulatory landscape as governments across the globe are enacting complex new policies to enforce VAT mandates. It examines the demanding and unprecedented insight now required into your economic data so that regulatory authorities enforce standards and close revenue gaps.
This year’s report examines the evolution of law and practice around the four emerging megatrends that Sovos experts identified in the 12th edition. These trends, many of which revolve around tax compliance and controls being ‘always on’, have the potential to drive change in the way organizations approach regulatory reporting and manage compliance.
Authored by a team of international tax compliance experts, we provide extensive recommendations on how companies can prepare for and thrive through these changes.
Get the report
The four mega-trends that we examine are:
Continuous Transaction Controls (CTCs) – Countries with existing CTC regimes are seeing improvements in revenue collection and economic transparency. Now, other countries in Europe, Asia and Africa are moving away from post-audit regulation to adoption of these CTC-inspired approaches. The report highlights how countries like France and Hungary have accelerated their transition to CTCs, and how many jurisdictions are combining invoice controls with CTC transport documents, thereby expanding their real-time reach from financial to physical supply chains.
A shift toward destination taxability for certain cross-border transactions – Cross-border services have historically often escaped VAT collection in the country of the consumer. Due to a large increase of cross-border trade in low-value goods and digital services over the past decade, administrations are taking significant measures to tax such supplies in the country of consumption or destination.
Aggregator liability – With the increase of tax reporting or e-invoicing obligations across different taxpayer categories, tax administrations are increasingly looking for ways to concentrate tax reporting liability in platforms that naturally aggregate large numbers of transactions already. Ecommerce marketplaces and business transaction management cloud vendors will increasingly be on the hook for sending data from companies on their networks to the government, potentially even inheriting liability for paying their taxes. The report notes how the July 2021 introduction of sweeping changes in e-commerce VAT legislation via OSS and IOSS are confirming this trend.
E-accounting and e-assessment – Combining CTCs with obligations to synchronize entire accounting ledgers makes onsite audit necessary only in cases showing major anomalies across these rich data sources. Over time, the objective is for VAT returns and other tax reports to be prefilled by the tax administration based on taxpayers’ own, strongly authenticated source system data. A brief deep-dive into the origins and potential future of SAF‑T shows how this trend is evolving to become a solid companion to CTCs globally.
CTCs have emerged as the primary concern for multinational companies looking to ensure compliance despite growing diversity in VAT enforcement approaches. Tax authorities are steadfast in their commitment to closing the VAT gap and will use all tools at their disposal to collect revenue owed. This holds especially true in the aftermath of COVID-19, when governments are expected to face unprecedented budget shortfalls.
The potential costs and risks associated with the trends highlighted in the report cannot be effectively mitigated with a reactive or opportunistic approach. The digital transformation of tax administration can – if approached as just an evolution of the legacy ‘post audit’ VAT world – significantly contract the digital transformation of businesses. This report suggests an analysis framework that companies can use to ensure ongoing VAT compliance whilst maximizing the opportunities of modern information and communication technologies for their own benefit.
In addition, Trends includes a major review of the country and regional requirement profiles. These profiles provide a snapshot of current and near-term planned legal requirements across the different VAT compliance domains.
This will address the tax challenges of an increasingly digital worldwide economy. As of 9 July 2021, 132 of the 139 OECD/G20 member jurisdictions have agreed to the Inclusive Framework on BEPS.
Pillar Details
Pillar 1
Pillar 1 gives a new taxing right, Amount A, to market countries to ensure companies pay tax on a portion of residual profits earned from activities in those jurisdictions, regardless of physical presence. Pillar 1 will apply to multinational enterprises (“MNEs”) with global turnover above 20 billion euros and profitability above 10%.
There will be a new nexus rule permitting allocation of Amount A to a market jurisdiction when the in-scope multinational enterprise derives at least 1 million euros in revenue from that jurisdiction. For jurisdictions with a GDP less than 40 billion euros, the nexus will instead be set at 250,000 euros.
The “special purpose nexus rule” determines if a jurisdiction qualifies for the Amount A allocation. Furthermore, countries have agreed on an allocation of 20-30% of in-scope MNE residual profits to market jurisdictions, with nexus using a revenue-based allocation key.
Revenue will be sourced to the end market jurisdictions where goods or services are consumed, with detailed source rules still to come.
More details on segmentation are still in the works, as is the final design of a marketing and distribution profits safe harbour that will cap the residual profits allowed to the market jurisdiction through Amount A.
Lastly, countries have agreed to streamline and simplify Amount B with a particular focus on the needs of low-capacity countries. The finalised details are expected to be completed by the end of 2022.
Pillar 2
Pillar 2 consists of Global anti-Base Erosion (“GloBE”) Rules that will ensure MNEs that meet the 750 million euros threshold pay a minimum tax rate of at least 15%. The GloBE Rules consist of an Income Inclusion Rule and an Undertaxed Payment Rule, the latter of which still needs to be finalised.
Pillar 2 also includes a Subject to tax rule, which is a treaty-based rule, allowing source jurisdictions to impose limited source taxation on certain related party payments subject to tax below a minimum rate. The rate will range from 7.5 to 9 percent.
When Will the Plan be Implemented?
There is currently a commitment to continue discussion, in order to finalise the design elements of the plan within the agreed framework by October 2021. Inclusive Framework members will agree and release an implementation plan.
The current timeline is that the multilateral instrument through which Amount A is implemented will be developed and opened for signature in 2022, with Amount A coming into effect in 2021. Similarly, Pillar Two should be brought into law in 2022, to be effective in 2023.
More Details to Come
Although the key components of the Two-Pillar Solution have been agreed upon, a detailed implementation plan that includes resolving remaining issues is still to come.
As many countries could be implementing these changes in the near future, it is important for businesses active in the digital economy to carefully track and understand the developments surrounding the OECD/G20 Base Erosion and Profit Shifting Project.
It is time to get ready for the digital transformation of tax with Sovos VAT solutions.
New VAT reporting requirements are sweeping across the world with increasing intensity and diversity. Tax authorities are on a digital transformation journey, profoundly impacting how companies operate and comply with VAT law. As a result, the challenges that a company trading cross-border faces today may well be among the most onerous in history.
We are here to help.
The Rise of Continuous Transaction Controls
The end of this tax revolution, caused by varying forms of digitalization, is not yet in sight. Many countries around the world, particularly in Europe, have just started their individual journeys toward continuous transaction controls (CTCs). Then there are other countries such as Chile and Brazil in Latin America that have had them for many years. They continue to add new features to further close VAT gaps and to add interoperability. As a result, these additions increase economic benefits to the foundations they built.
Multinational companies need a global VAT solution that grows with them. Many companies feel lost among the rapid succession of CTC mandates around the world. They don’t know how to avoid placing themselves in a costly and perilous corner by using a multitude of diverse local solutions. In working with such companies and their solution providers, we know how crucial it is for responsible executives to help all affected corporate functions cooperate toward forming and adopting a coherent approach that turns CTCs into an advantage rather than a risk.
Tax peace of mind
Sovos is a global leader in tax compliance with global coverage and local expertise. We process more than five and a half billion tax compliance transactions every year in more than 100 countries. Our global coverage is supported by over 2,500 employees in more than 15 countries.
We provide our customers with complete tax peace of mind by providing the first complete global cloud solution for modern tax. Our team of 100 regulatory experts constantly monitor the VAT landscape for regulatory changes across thousands of jurisdictions.
As more tax authorities introduce tax reforms to increase efficiency and close VAT gaps, we make sure our customers are prepared. We ensure they’re able to meet the challenges that increased compliance requirements bring. We help businesses stay ahead of fast-changing government regulations allowing them the breathing space to innovate and grow.
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Our solutions are built into the business process platforms used today, including SAP, Oracle, and Magento. Sovos provides seamless integration with one global provider and a centralized global VAT solution.
Sun Chemical consolidates its global tax obligation with Sovos
case study
Sun Chemical
Sovos made multinational reporting simple for Sun Chemical, allowing it to consolidate its compliance efforts.
Summary
Business Challenges
Sun Chemical sought to find the right solution to minimise the impact of changing mandates on 24/7 business operations.
The company needed to address language barrier among local and technical teams.
Solution
Sun Chemical needed a platform that could consolidate its compliance efforts across all its Latin American markets.
Benefits
The Sovos Business to Government regional solution minimises business delays and disruptions for 24/7 operations.
It offers local support in Spanish, English, and Portuguese, eliminating the language barrier issue.
Without the constant need for legislative monitoring, the Sun Chemical team can focus on innovation.
The Company
Sun Chemical is the world’s largest producer of printing inks and pigments. With more than $3.5 billion in annual sales, the company is a leading provider of materials to packaging, publication, coatings, plastics, cosmetics and other industrial markets in 56 countries. Sun Chemical operates 24 hours a day, seven days a week, and has hundreds of multinational suppliers and partners from around the world.
The Challenge
Sun Chemical cannot afford business disruptions or shipping issues due to its operating schedule. Its e-invoicing process must be seamless across throughout the process, including SAP configuration, middleware performance, connections to the local authority’s compliance server, and printing.
Because of e-invoicing mandates in Latin America, Sun Chemical faced the challenge of conducting constant legislation reviews to determine new requirements that needed to be converted into the system. The language barrier also posed a challenge. With technical requirements being communicated in local languages, fluency to understand the mandates and to convert changes into the system was required. For parties without a high level of technical proficiency in the local language, this caused lag time and confusion, contributing to reduced efficiencies.
The Solution
Based on individual compliance needs, Sun Chemical initially elected to implement different solutions in each country. In Argentina, it selected the regional Sovos Business to Government Reporting solution to maintain its compliance platform. In Chile and Mexico, it selected two separate local providers with two different models, and in Mexico, it implemented an internal solution. Get in touch with our experts for your compliance journey.
“Change is happening, but we’ll automatically solve it with the [Sovos] solution. Converting a legal requirement in a local language into a configuration plan is very complex, so the service of automatic updates to the new legislation was a clear key point of help for us.”
Aldo Magenes
SAPAnalyst, Sun Chemical
The Benefits
The metrics showed a large production support advantage in Argentina, where Sun Chemical had implemented the Sovos Business to Government Reporting regional platform. The company elected to expand its partnership with Sovos to cover its operations in Chile, Mexico and Brazil as well.
The Results
With local support in English, Portuguese and Spanish, the Sovos Business to Government Reporting regional platform helped Sun Chemical isolate its compliance problems and focus on driving business results. The Sovos solution alleviated the need to monitor every single change and translate each of those changes into system configuration plans, saving the team valuable time and reducing the risk of penalties.
Why Sovos?
Sun Chemical evaluated each of its four Latin American e-invoicing compliance solutions with a series of analytics measuring cost and benefits. Company leaders knew the internal team’s time was best spent on innovation and improving business and customer relationships, so they were looking for the solution that would minimise delays and disruptions and keep the team focused where it mattered most.
Real-time processes and responses required by mandates impacting business operations
Limited IT resources to monitor and implement requirements
Solution
Brown Forman selected Sovos’ Business to Government regional reporting platform for:
Brazil Nota Fiscal
Mexico CFDI
Mexico eContabilidad
Benefits
Seamless integration with SA
Constant monitoring and support has resulted in zero business disruptions
Ability to redeploy resources to core business functions
Need for ongoing SAP upgrades and IT burdens eliminated
The Company
Brown-Forman is one of the ten largest spirits companies in the world, distributing products in more than 160 countries. Based in Louisville, Kentucky with offices across the globe, Brown-Forman manufactures iconic brands such as Jack Daniels, Southern Comfort and Woodford Reserve.
The Challenge
International expansion has been integral to Brown-Forman’s success, but this growth strategy placed a great demand on its IT team. The company’s SAP systems needed to comply with the constantly changing financial legislation around the world, and e-invoicing mandates threatened to exceed the Brown-Forman IT team’s bandwidth. This was especially a concern in Brazil and Mexico, where the company operates nine facilities and regulations change frequently.
Demanding real-time processes and responses, any e-invoicing oversight in these countries would affect both the finance and supply chain teams, and could significantly impact business operations.
The Solution
With limited in-house IT resources to monitor and implement each country’s fiscal requirements, Brown-Forman needed a solution that would help it adapt to the ever-changing Latin American landscape and also integrate into its single global instance of SAP ERP.
Given the extensive scope of its operations in Latin America, Brown-Forman realised that it needed a specific subject matter expert. In addition, the company required a predictable cost structure during its heavy expansion.
“Because Sovos provides the network upgrades as well as the SAP ERP configurations, we have been able to work with one vendor across multiple countries and confidently manage the changes to Brazil’s Nota Fiscal and Mexico CFDI’s legislation.”
Randy Isdahl
Director, SAP Process Architecture at Brown-Forman
The Benefits
Sovos provides Brown-Forman with constant monitoring and support, ensuring no compliance-related business disruptions. Plus, the Sovos solution seamlessly integrated within Brown-Forman’s existing systems, allowing the company to manage multi-country compliance directly within its internal SAP system.
The Results
With Sovos e-invoicing compliance in place, Brown-Forman was able to redeploy resources to core business functions, including account receivables and account payables, and focus on supply chain and logistics enhancements. In addition, the partnership has eliminated the ongoing SAP upgrades and IT burdens caused by the constantly changing e-invoicing regulations.
Why Sovos?
Brown-Forman selected the Sovos eInvoice and eAccounting regional solutions to simplify its compliance efforts in Brazil and Mexico. The company sought a solution that could help it cut down on human resource capital and technology investments, and Sovos’ SaaS platform allowed it to accomplish that goal.
