The Chilean Internal Revenue Service (SII) recently published version 4.00 of the document describing the format of electronic tickets for Sales and Services.

The electronic ticket (or Boleta Electrónica) is an electronic receipt issued for the sale of goods or services to individuals, consumers or end users.

The electronic ticket is for less formal, business-to-consumer (B2C) transactions and is subject to less rigorous reporting requirements than electronic invoices (Factura Electrónica). It is often used for smaller transactions, such as retail purchases or services rendered to individuals.

Who is required to issue electronic tickets?

Businesses must use certified invoicing software to generate electronic tickets. These software solutions need to be approved by the Chilean tax authority, the Servicio de Impuestos Internos (SII).

The generated electronic invoices must be digitally signed using an electronic signature to ensure their authenticity and integrity.

Taxpayers authorised as issuers of electronic tickets must digitally send all the electronic tickets issued and generated to the SII. These should follow the Technical Instructions provided in Annex 1 of Resolution 74 of 2020, and any future updates.

What’s required in an electronic ticket?

In accordance with the Technical Instructions, the electronic ticket must contain the following information:

After generating the electronic tickets, businesses submit them to the SII. Since the SII must validate both the XML format of the document and its electronic signature, the SII has established a limit of 500 ballots per batch.

How electronic tickets can help businesses

On the other side of the transaction, the recipient of an electronic ticket can access and verify the invoice through the SII’s online platform. They can accept or reject the invoice, which helps maintain transparency and accurate transactions.

The data generated by this electronic receipt system drives efficiency. For example, businesses can obtain important information, such as:

Businesses must maintain records for six years in the XML format established in version 4.00.

Non-compliance with the electronic invoicing requirements or submitting inaccurate information can lead to penalties. The SII has the authority to audit businesses to ensure compliance with tax regulations.

Need help for invoicing in Chile?

Are you in financial services or working at a bank with more questions about invoicing in Chile? Speak to our tax experts.

With the publication of Resolution 097-2023, the National Superintendency of Customs and Tax Administration of Peru (SUNAT) has established the procedure for refunding the general sales tax (IGV) to tourists.

The establishment of this facility previously required a series of reforms and adjustments to Peruvian regulations. This regulation is preceded by Supreme Decree No. 226-2020-EF which modified the regulations of the General Sales Tax and Selective Consumption Tax Law to incorporate tax refunds for tourists – defined as foreign natural persons not domiciled in the country and who remain for no more than 60 days.

At the beginning of 2023, SUNAT published Resolution 005-2023 through which the regulation of payment vouchers and the rules on electronic issuance were modified. The administration changed the rules to allow the issuance of invoices to tourists entering the country.

This invoice can be issued at authorised establishments when goods are sold. In this case, the identification data of the purchaser will not be RUC but a passport.

SUNAT published Resolution 091/2023 in April 2023 to establish rules for the Register of Authorized Establishments (REA) to regulate the registration, permanence and exclusion of taxpayers for the right to return the IGV to tourists.

VAT Refund Procedure for Tourists

On the date of their departure from Peru, tourists who have not exceeded the authorised time of stay in the country can initiate the return procedure with the collaborating entity. Tourists can use the self-management kiosk or the mobile application, which is available inside international air or sea terminals.

The payment to the credit or debit card will be made within five calendar days from the request being registered, discounting the commission that the collaborating entity charges for this service.

Checkpoint Enabled

The checkpoint has been enabled since 2 May 2023 in the pre-boarding control area on the first floor of the Jorge Chávez International Airport.

Argentina has recently expanded its perception VAT (Value Added Tax) collection regime to ensure efficient tax administration. It has included selling food and other products for human consumption, beverages, personal hygiene, and cleaning items under its scope.

The Argentinian Federal Administration of Public Revenue (AFIP) established this through Resolution No. 5329/2023 in early February 2023.

The new resolution aims to further expand the regime known as “Régimen de Percepción del Impuesto al Valor Agregado” to the categories related to food and other products for human consumption, beverages, personal hygiene, and cleaning items.

Taxpayers who issue invoices concerning these provisions must ensure compliance with the document data requirements, used as evidence of the collection for the final VAT calculation. This will be further discussed in this article.

Scope of the VAT Collection Regime

The VAT Collection Regime in Argentina is a scheme by which the seller, designated as “Collection Agent”, charges the buyer an amount additional to the sale price. As a result, the supplier will charge the fee on top of the purchase value, which includes the price and the VAT.

This new regime obliges VAT-taxable persons to act as collection agents when selling food products for human consumption, beverages, personal hygiene and cleaning items. A few exceptions include meats, fruits and bread made exclusively from wheat flour, among others. Taxable people registered for VAT purposes will also be subject to this regime when acquiring said products.

Applicable rates

The collection regime will only apply when each transaction amount exceeds ARS 3000.

The fee amount is determined by applying 3% to the net price of the operation resulting from the invoice or equivalent document.

This percentage will be 1.50% in the case of operations taxed with a rate equivalent to 50% of the general VAT tax rate.

Reporting and invoices as proof of perception

The information and payment of the perceptions carried out under this regime will be reported through the Withholding Control System (SICORE), using code 602.

The resolution also establishes that the only valid document to prove the payment of the perceptions will be the invoice or equivalent document (issued under the current invoicing regulations). The document will record the amount received in a discriminated manner and with express mention of this regime.

Those taxable persons using “Fiscal Controllers” documents of “New Technology” to comply with the provisions of the preceding paragraph must use the section “Other Taxes” on the document.

Implementation date

The collection regime will be applicable for taxable events perfected as of 1 April 2023. As a result, sellers of food and other products for human consumption, beverages, personal hygiene and cleaning items will charge the buyer an additional 3% or 1.5% as appropriate on the sale price according to the applicable fee.

Customers can securely process high volumes of documents for billing and electronic validation in real- time

BOSTON – October 5, 2022 – Global tax software provider Sovos today announced it has acquired Lima, Peru-based Escontech, one of the main leaders in the country in SaaS electronic invoicing and validation services for the issuance of electronic receipts. In the last five years, the company has specially focused on the integration of transactional solutions in Information Technology using world-class standards, achieving in the last two years the fastest growth in the ecosystem of Peruvian companies that provide this type of specialized services.

Escontech’s technology and positioning in the Peruvian market strengthen Sovos’ current capabilities and scope in this type of services, by efficiently covering and supporting major companies in areas such as banking, financial services, insurance, mass market, tolls, and other high transaction industries. The company has been approved as an Electronic Services Provider and Operator by the Peruvian Tax Administration (SUNAT), which allows it to support its users in the issuance, transformation and final computer verification of invoices, bills, and other electronic payment vouchers from a company’s administrative systems.

“Escontech will play an important role in our ability to provide customers in these regions, as well as globally, with the technology needed to process high volumes of documents securely for billing and electronic validation, while ensuring compliance with local regulations. These solutions will be a great complement to Sovos’ existing portfolio, simplify the integration process and be supported by the best professional services group in the industry,” said Alvaro Gonzalez, managing director, Latin America.

Leading companies and institutions rely on Escontech to validate their transactions quickly and securely, paving the way for frictionless commerce business environment. Together, Escontech and Sovos will help lead the fight against fraud while ensuring compliance in highly regulated industries.

“The group of professionals that make up the productive force of Escontech value with great enthusiasm to be part of a great global organization and leader such as Sovos. Since our beginnings in the provision of this type of specialized transactional services, we have sought to innovate with value, by delivering a user experience of quality and excellence, but mainly, of commitment and closeness. Now with Sovos’ vision, its technological and financial resources, its multi-territory presence, and its specialized human talent, we will contribute more efficiently to delivering satisfactory experiences to users in different areas and geographies,” said Rogelio Martinez, founder of Escontech.

Sovos is owned by Hg, the London-based specialist private equity investor focused on software and service businesses, and TA Associates. The terms of the deal were not disclosed.

About Sovos

Sovos was built to solve the complexities of the digital transformation of tax, with complete, connected offerings for tax determination, continuous transaction controls, tax reporting and more. Sovos customers include half the Fortune 500, as well as businesses of every size operating in more than 70 countries. The company’s SaaS products and proprietary Sovos S1 Platform integrate with a wide variety of business applications and government compliance processes. Sovos has employees throughout the Americas and Europe and is owned by Hg and TA Associates. For more information visit www.sovos.com/es and follow us on LinkedIn and Instagram.

About Escontech

Escontech is a company dedicated to the integration of information technology and security solutions through world-class standards. Throughout its history, the company has incorporated a special group of human talent that in the last 16 years has provided services to leading companies in Colombia, Ecuador, Peru, Venezuela, and the Caribbean.

With the entry into force of resolutions SAT-DSI-1240-2021 and SAT-DSI-1350-2022, most taxpayers in the country are now obliged to issue electronic invoices under the Online Electronic Invoice System (Regimen de Factura Electronica en Linea – FEL).

The latest taxpayers to join the mandatory electronic billing system are include taxpayers incorporated into the General Value Added Tax (VAT) Regime and the group of natural and legal persons registered in the Small Taxpayer Regime.

With the addition of these last two groups, the Superintendence of Tax Administration of Guatemala (SAT) has practically completed the gradual process of incorporation into the country’s electronic invoicing regime.

Today, the general population should only accept FEL documents from obligated taxpayers. Paper invoices (preprinted) are no longer valid, making them unusable for transactions such as tax credit, among others.

The operating model and the rules applicable to the online electronic invoice of the Republic of Guatemala includes the issuance, transmission, certification, and preservation by electronic means of invoices, credit and debit notes, receipts, and other documents authorised by the Superintendence of Tax Administration, known as Electronic Tax Documents (DTE).

Electronic documents

The following tax documents are available for issuance under the Regimen de Factura Electronica en Linea – FEL:

Guatemala e-invoice issuance process

The Guatemalan system follows e-invoice clearance system, the well-established trend in LatAm countries. The clearance system means that the tax authority must authorise the electronic documents before the issuer is able to send them to the recipient.

Archiving

The SAT store all invoices. This does not exempt senders and receivers from keeping the XML file for the period of four years, established in the Tax Code. The certifiers are also obliged to keep the certified DTE files in XML format, as well as the respective acknowledgments of receipt from the SAT.

Implementation

Now 98.23% of the total billing of the General VAT Regime is using FEL, with only around 20,000 businesses needing to migrate to the system since it was first launched in 2020.

Online e-invoices for all remaining VAT registered business will be mandatory from 1 April 2023 via the FEL.

Need help with e-invoicing in Guatemala?

Invoicing in Chile is changing on 1 December 2022. This is when resolution 66 from the Chile Internal Revenue Service comes into force.

This new regulation concerns organisations with foreign currency operations. Banks, stockbrokers, exchange houses and financial institutions are affected. Other intermediaries or entities that carry out foreign currency purchase and sale operations themselves or on behalf of third parties are also included.

How is invoicing in Chile changing?

Every electronic tax document must consider the specifications described by “Electronic Tax Document Format”. This document is available on the Internal Revenue Service’s website and is regularly updated.

What electronic information is required in Chile?

Resolution 66 also contains technical instructions. These establish the details necessary for electronic tax documents that support foreign currency purchase and sale operations.

There are other requirements not listed above, so it’s important to check the guidelines.

This change allows the Internal Revenue Service to receive, validate, and process electronic tax documents. This ensures the operations are accurately reflected and prevents inconsistencies.

More on rights, commissions and other charges in Chile

In the case of commissions, the taxpayer must issue an invoice or electronic ticket containing all the information indicated by the Technical Annex.

Likewise, when differences in collections and values are subject to VAT, an electronic credit or debit note must be issued.

Need help for invoicing in Chile?

Are you in financial services or working at a bank with more questions about invoicing in Chile? Speak to our tax 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:

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.

Changes in EFD-REINF Reporting

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.

What is EFD-REINF?

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?

How is the EFD-REINF structured?

There are three groups of reports, or “events,” that must be submitted to the tax administration:

When does it go into effect?

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.

More taxpayers join the Electronic Invoicing System of Paraguay (SIFEN)

Since Paraguay started implementing its National Integrated System of Electronic Invoicing (SIFEN) plan in 2017, the Undersecretary of State for Taxation of Paraguay (SET) has carried out the process.

Due to the arrival of SET resolution 105/21, numerous companies have been voluntarily incorporated into the system. This is to prepare for mandatory electronic invoicing in 2023. SET resolution 105/21 provides measures for the issuance of electronic tax documents and an implementation calendar for 10 groups of taxpayers.

More than 80 million electronic documents have been issued since the system started operating. With resolution 105/2021 coming into force, it is expected that over 5,000 taxpayers must issue their receipts electronically by 2023.

How the SIFEN Works

The SIFEN is oriented towards large and medium-sized invoice issuers, whether they join voluntarily or are mandatorily designated by the Sub-Secretary of State for Taxation (SET).

In the first moment, because of the commercial operation, the obliged taxpayer issues the digitally signed electronic document and sends it to the buyer or receiver in XML format. The issuer must make available a graphic representation of the document (KuDE) that supports the transaction in a physical or digital format if the buyer or recipient is not operating under the SIFEN.

The second moment comprises taxpayers’ transmission of the digitally signed XML document to the SET for its approval process.

SIFEN’s operating model is deferred, meaning that the issuer of an electronic invoice must transmit the electronic documents in an XML file for their respective validation. This needs completing within 72 hours of the electronic document’s signature – any later and it will be considered as extemporaneous transmission and subject to penalties.

Electronic documents acquire the nature of Electronic Tax Documents (DTE) with legal validity and tax incidence once signed and authorised by the Tax Administration by means of an approval transaction number.

Mandatory and Voluntary Adoption

Resolution 105/2021 expands the list of those required to advance with the mass use of electronic invoicing, establishing the dates from which 10 groups of taxpayers must electronically issue all tax documents.

In accordance with the calendar established by the resolution, the companies participating in the pilot phase and voluntary adhesion became mandatory for electronic invoicing as of 1 July 2022.

The other taxpayers made up of groups 3 to 10 must implement electronic invoicing according to the schedule that begins with group 3 on January 2 January 2023, and ends with Group 10 on 1 October 2024.

Voluntary adoption is possible for all taxpayers who wish to issue invoices electronically via the SIFEN. The minimum requirements are for companies to use software that integrates with the SIFEN and holds a valid Digital Signature certification.

Paraguay’s New E-invoicing System to Gradually Become Mandatory From July 2022

The electronic invoicing system in Paraguay has been in development since 2017 according to the plan carried out by the Undersecretary of State for Taxation (SET) to modernise and improve tax collection and minimise the incidence of tax fraud.

The introduction of the Integrated National Electronic Invoicing System (Es. Sistema Integrado de Facturación Electrónica Nacional -SIFEN –) meant the introduction of a new e-invoicing regime in the country. The adoption of this new system is currently in its voluntary adhesion phase, which began in 2019, and has allowed entrepreneurs, merchants, and companies to issue e-invoices optionally. However, from July 2022, the use of the system will gradually become mandatory for certain taxable persons.

Electronic Tax Document types

Taxpayers in Paraguay can use the SIFEN to issue Electronic Tax Documents (Es. Documento Tributario Electrónico – DTE). The DTE is a digital version of the invoice and other traditional documents, which has tax and legal validity. The DTE has become a modern, effective, secure and transparent form to issue and manage e-invoices for distinct types of business operations.

The DTEs are validated upon issuance by the SAT to support the VAT deductions and transactions related to income tax. Among the distinct types of DTE in Paraguay, we find:

The DTE issuance process

The e-invoices issued by the taxable persons that have adhered to the SIFEN are generated in XML format. The authenticity and integrity of each document are guaranteed through the digital signature and the control code that DTEs include. Each document must be sent electronically to the tax administration for its clearance.

The SIFEN is responsible for verifying and validating each document. Once it is established that the DTE meets all the requirements, it becomes a legal e-invoice. The taxable persons issuing the e-invoice then receive the verification results through the web service system.

After the e-invoice is cleared, suppliers can send the DTE to their buyers via email, data messaging or other means.

Paraguay E-invoicing mandate roll-out

The Paraguayan Undersecretary of State for Taxation recently published a General Resolution providing administrative measures for the issuance of DTEs. This resolution also established a phased schedule of implementation, in which certain taxable persons will be required to issue e-invoices and other DTEs using the SIFEN.

The implementation schedule consists of ten stages starting on 1 July 2022 with all taxpayers who joined the pilot program to adopt the SIFEN. From January 2023, the mandate will include more taxpayers. However, it is not yet defined which companies will start in that stage. The SET aims to cover all taxpayers carrying out economic activities in the country by October 2024.

What’s next

Companies in Paraguay must get ready to issue e-invoices under the requirements of the SIFEN. From 1 July 2022, all companies in the country will be able to use this system voluntarily. The list of taxpayers required to comply with the mandate will be available on the SIFEN website and on the SET website (www.set.gov.py). The SET will notify affected taxpayers via the Paraguayan Tax Mailbox known as “Marandu.”

Ebook

Managed Services for VAT Compliance

Many multinational companies find VAT compliance challenging, especially when trading cross-border. With the increase in real-time reporting across Europe and differing VAT registration and reporting requirements, VAT compliance now requires significant resources and specialist knowledge to ensure compliance and avoid costly penalties. As your business expands, so do your VAT obligations. This is why many organisations, turn to managed service providers to ease the burden of VAT compliance, audits and fiscal representation. This e-book discusses the many elements of VAT compliance including:

VAT registration
Fiscal representation
How to determine VAT obligations
Filing VAT returns
Preparing for an audit
Managing VAT changes
VAT compliance advice from JD Sports’ Indirect Tax Manager

Download a copy of the VAT managed services e-book

Get the e-book

How JD Sports manage VAT compliance with Sovos’ Managed Services

John Dowd, Indirect Tax Manager at sport-fashion retailer JD Sports discusses how he managed cross-border VAT compliance with the help of Sovos’ managed services

“For us at JD Sports and me personally I’m looking for a partnership, something long term, as it takes time and costs money to change advisors. I’m looking for a long-term relationship over a number of years with a VAT service provider.
“I want my advisor to have specialist knowledge, for us that’s retail and cross-border supply chains, overseas tax authorities, and I want to see new talent joining the team. I prefer a single point of contact to make it easier to move things along and of course, competitive pricing, and Sovos ticked all of these boxes for us.”

John Dowd, Indirect Tax Manager at JD Sports

The many elements of VAT compliance

VAT compliance has many elements, beginning with an understanding of place of supply rules to determine where VAT registration is required. Fiscal representation might be required to register in EU Member States.

Once VAT registration is underway, the next step is to determine EU VAT obligations by mapping the supply chain for the country of registration. There are also additional requirements to consider including exemptions, recovering VAT, Intrastat and varying continuous transaction controls (CTCs) mandates.

Submitting VAT returns to ensure compliance is a never-ending process. Each country has its own VAT return regulations and additional declaration requirements.

The VAT compliance cycle also includes preparation for VAT audits. Tax authorities can carry out audits for a variety of reasons so it’s important businesses prepare for audits and ensure they are able to manage the process successfully.

How Sovos VAT Managed Services can help with VAT compliance

Sovos’ end-to-end, technology-enabled VAT Managed Services can ease your compliance workload and mitigate risk where-ever you operate today, while ensuring you’re ready to handle the VAT requirements in the markets you intend to dominate tomorrow.

Download the VAT managed services e-book

Guide

Indirect Tax Rules for Insurers Across Europe

IPT is a complex thing to deal with.

Many tax authorities are increasing their focus on the insurance industry in an effort to close tax revenue gaps, with many introducing Insurance Premium Tax (IPT) and other indirect taxes for insurance. Globally, IPT is fragmented across over 200+ countries and achieving compliance can be a complex process requiring specialist knowledge.

Insurers, especially those operating across multiple territories, can find keeping up to date with the latest IPT rates, rules and regulations to ensure compliance challenging.

This guide provides a helpful snapshot of the indirect tax rules that apply to insurance premiums across Europe.

Download the Indirect Tax Rules for Insurance Across Europe guide

Get the guide

The guide provides a useful reference of indirect rules across Europe including:

Albania, Andorra, Austria, Belarus, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany, Gibraltar, Greece, Guernsey, Hungary, Iceland, Ireland, Isle of Man, Italy, Jersey, Kosovo, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Moldova, Monaca, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, San Marino, Slovakia, Slovenia, Spain, Switzerland, United Kingdom.

Insurance Premium Tax compliance

The digitization of tax is a trend that will undoubtedly continue. Organisations need to prepare for any changes to reporting as this will impact compliance obligations for the countries they operate in.

Tax authorities have increased their focus on the insurance industry to ensure IPT and parafiscal taxes are collected correctly, accurately, and on time.

Operating in multiple countries inevitably means also having to comply with many local regulations in line with IPT statutory and parafiscal filing. Compliance regimes can be simple or complex, but the difficulty is that they’re varied.

Download our guide to ease this burden.

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.

As managing director for the Americas region, Alvaro leads multiple Sovos initiatives, including integrating acquired companies and technologies into our strategic solutions and product offerings. Alvaro believes that adopting a client first approach helps to better understand customer needs and focus on solving specific problems across regions.

Alvaro joined Sovos from its acquisition of Acepta, where he served as CEO. During his tenure, he guided the company to a leadership position in the issuance of electronic invoices, e-documents and digital identity in Chile. Now with Sovos, he sets the strategy to bring these services to all of the SSA region.

Creating a culture with a singular focus on solving customer problems is something Alvaro is passionate about. He views his role as bringing together a talented group of people, tapping their full potential and providing them with the tool necessary to be successful. The opportunity to build a new team inside Sovos has inspired him to begin a new journey of problem solving.

When not in the office, you’ll find Alvaro playing golf, tennis or running. He also keeps busy by teaching tennis to his three kids.

With more than 15 years of experience leading management, financial and strategic advisory projects in various global companies, Rodolfo Esquivel is responsible for directing Sovos’ commercial operations in the region and leading the mergers and integrations of the company’s new acquisitions. helping to strengthen the commitment with Sovos Latin America customers.

Economist from the American University, in the United States, with a diploma in finance from the Adolfo Ibáñez University in Chile and a specialization in International Financial Reporting Standards (IFRS) from the Diego Portales University, his background in consulting includes business finance, transaction services and assistance for financial and strategic clients.

His career includes the positions of Transaction Services Manager at PWC Consulting, Senior Business Development Manager at Honeywell, Corporate Finance Director at Glitnir Capital, Corporate Management Director at Deloitte Consulting, Corporate Finance Partner at EY and Director of Agricultural Land Corporation finances.

Paulo Castro has held the position of Country Manager for Sovos Brazil since 2018. He has more than 26 years of experience in the information technology market, in highly competitive segments and in business transformation projects.

He began his career at IBM in the PC area and held various managerial and executive positions in Brazil and Latin America. After 20 years he joined SAP Brazil, where he served for 5 years as Vice President of Sales.

His legacy has been to create highly motivated teams and business models aimed at exceeding set goals and generating sustained growth through the use of technological solutions and a commitment to the development and success of his team. He believes in the need to establish a clear strategy, in the team and in the daily execution. His main personal characteristics are discipline, resilience and creativity.

He is an engineer and holds a master’s degree in Business Administration from EAESP – FGV, with specializations at the Wharton School and the University of Cologne, in Germany.

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 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 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.

Moving goods from one place to another is a quintessential part of business. Manufacturers, wholesalers, transporters, retailers and consumers all need to carefully orchestrate the shipping and handling of raw materials, parts, equipment, finished goods and other products to keep business flowing. This supply chain harmony is what makes production and trade possible in society.

In Canada, the United States and most European countries, tax administrations don’t intervene much in these trade processes. Until recently, the same could be said about most countries of Latin America. But, with the rise and expansion of electronic invoicing mandates in the region, this is rapidly changing.

Most governments with mature e-invoicing mandates are now recognizing that these mechanisms and government platforms can be used as vehicles to understand where, what, how and when goods are being moved. The traditional electronic invoice, is no longer enough – and tax authorities are requiring businesses to report goods movements in real-time.

The implications are serious too. Goods moved on public roads without those documents are very likely to be seized by the authorities, and the owners and transporters will be subject to fines and other sanctions.

Brazil and Mexico lead the way

The country with the most sophisticated system in place is arguably Brazil. The MDF-e (or Manifesto Eletrônico de Documentos Fiscais) is a mandatory document required by the tax administration in order to audit the movement of goods in Brazil.

This purely digital document combines the information of an electronic invoice (NF-e) and the electronic documents that hauling companies issue to their clients (CT-e). This system became mandatory in 2014 and has since been expanded and modernized with a vast grid of electronic sensors and transponders placed in the public highways of Brazil, intended to ensure that every truck moving goods already has the corresponding MDF-e, NF-e and CT-e. In most cases, the authorities don’t need to stop the trucks to verify the existence of the document.

Mexico recently issued a new resolution requiring taxpayers delivering goods, or simply redistributing them, to have the corresponding authorization from the tax administration (SAT). Products delivered by road, rail, air or waterways need to have what is known as the CFDI with the Supplement of Carta Porte.

CFDI is the acronym for an electronic invoice in Mexico. That supplement of Carta Porte is a new attachment to the electronic invoice of transfer (Traslado) issued by the owners delivering products or to the CFDI of Income (Ingresos) issued by the hauling companies. Carta Porte will provide all the details about the goods being transported, the truck or other means being used, the time of delivery, route, destination, purchaser, transporter and other information. This new mandate will become effective on 30 September 2021. As is in Brazil, noncompliance with this mandate will result in hefty penalties.

E-transport elsewhere in LatAm

Chile also has a mandate requiring the delivery of goods to be pre-authorized by the tax administration. These tax authorized documents are locally known as Guias de Despacho (or dispatch guides) and since January 2020 they can only be issued in an electronic format.

There are some exceptions where the dispatch guide can be issued temporarily on a paper format by certain taxpayers. Also, in cases of contingency, taxpayers may be authorized to issue paper versions of the guide; however, that will not exempt the issuer of regularizing the process once the contingency is complete.

The content of the dispatch guide will vary depending on who issues it and the purpose of the delivery (sales, consignment, returns, exports, internal transfers etc.) but in general, delivery of goods in Chile without the authorized dispatch guide will be subject to penalties from the tax administration (SII).

Argentina has a federal level VAT and a provincial level gross revenue tax. To control tax evasion, both levels of governments exercise certain levels of control in the process of dispatching goods within their jurisdictions.

The tax authority’s system for controlling the flow of goods in public ways is not as encompassing as in Brazil, Chile and Mexico, but it is getting closer. Only the provinces of Buenos Aires, Santa Fe and Mendoza, plus the City of Buenos Aires, require authorization from the fiscal authority to move goods that originated in, or are destined to, their jurisdictions. For that, they require the COT (or Transport Operations Code) where all the data related to the products, means of transport and other information is included once the authorization is provided. The provinces of Salta, Rio Negro and Entre Rios are working on similar regulations.

At federal level, the AFIP (Federal tax administration) only requires pre-authorization for the delivery of certain products such as meat and cereals. But at this level too, the regulatory environment is changing.

The AFIP, along with the Ministry of Agriculture and the Ministry of Transportation have issued a joint resolution 5017/2021 that mandates the use of a digital bill of lading (Carta Porte Electronica) whenever there is a transfer of agricultural products on public roads in Argentina. This change will become effective on 1 November 2021. In 2022, this federal requirement may expand to other products.

LatAm sets the scene for electronic invoicing trends

The requirement of authorization for moving goods in LatAm is not limited to the largest economies of the region. Smaller countries with electronic invoicing systems have expanded, or are in the process of expanding their mandates to require taxpayers to inform the tax authority, before goods are moved as result of a sale or any other internal distribution.

For instance, Peru requires the Guias de Remision from taxpayers before they start the delivery of their products. This electronic document should be informed to and authorized by the tax administration (SUNAT) using the digital format established for that purpose and will include all the information about the product delivered, issuer, recipient, means of transport, dates and more.

Uruguay has the ‘e-Remitos’ which is an electronic document authorized by the tax administration (DGI). It is required for any physical movement of goods in Uruguay. As in other countries, this document will provide all the information about the goods being transported, the means used, the issuer, the recipient and additional data. It is electronically delivered and authorized by the tax administration using the XML schemas established for that purpose.

Lastly, in Ecuador the tax administration (SRI) requires the ‘Guias de Remision’ (Delivery Guide) for any goods to be transported legally inside the country. As the infrastructure to support the electronic invoice is not fully developed in Ecuador, in some cases the tax administration allows the taxpayer to comply with this part of the mandate by having the electronic invoice issued by the retailer delivering the goods to his clients. Even though Colombia and Costa Rica do not require a separate electronic document to authorize the transport of goods, it is expected that in the future, this requirement will come into effect, mirroring what has happened in many other countries of the region.

The common element of all these mandates in Latin America, is that all of them are closely knitted to the electronic invoicing system imposed in each country. They are basically seen as another module of the electronic invoice system where information regarding goods being transported by public roads, waterways, by rail or air should be submitted to the tax administration, via the XML schemas established for that purpose.

Tax administrations in the region are actively enhancing their systems to ensure that movements of goods are properly controlled in real time. In some cases, tax administrations have provided online solutions aimed at taxpayers with small numbers of deliveries. But for all other taxpayers, a self-deployed solution is required.

Enforcement of the mandate is made not only by the tax administration, but also by the police and the public roads authorities, both of which routinely seize goods for non- compliance. Since these mandates have proven to be successful to control tax avoidance and smuggling, it’s safe to say that the Remitos, Dispatch Guides, Carta Porte or COTs are here to stay for good and taxpayers doing business in Latin America have no option but to comply with this new regulatory requirement.

Mexican electronic invoicing system

Mexico's electronic invoicing requirements:

Mexico has one of the most sophisticated electronic invoicing systems in Latin America. Known locally as Comprobante Fiscal Digital por Internet, or simply CFDI, it was established in 2011, when it replaced the CFD or Comprobante Fiscal Digital. The difference between these two types of receipts/certificates that replaced the paper invoice is that the CFDI requires validation by an Authorized Certification Provider, also known as PAC. In some cases such validation can be done directly with the Tax Administration Service (SAT).

Have questions? Get in touch with a Sovos Mexico e-invoicing expert.

Types of tax certificates

Mexico’s electronic invoice system contains multiple types of tax certificates. Among the main ones are:

Income receipt: issued mainly in sales transactions for which some type of income is received in cash, check or any other form, generally for sales of goods and services, but also in case of donations and fees.

Proof of expenditure: this type of tax certificate is issued in cases where the company pays or returns money as a result of refunds, bonuses, discounts, or total cancellation of an income voucher. These are equivalent to credit notes.

Transfer certificate: these are used to justify the legitimate acquisition or possession of the goods that need to be transferred. These CFDI are used as a transportation contract when a company provides transportation of goods to the owner of the goods.

Certificate of payment receipts: these receipts are issued whenever a payment is received on a date other than that on which the transaction is made and the CFDI is generated. Their main function is to document the collection of a total or partial payment. Therefore, they are used for total payments (single payment), partial payments or credit payments received after the original CFDI has been issued. They contain a complemento de pagos (payment supplement). The Mexican VAT system uses cash accounting, which means that companies only pay VAT on the payments they receive immediately for their taxable sales. However, the electronic invoices that sellers provide to SAT include information on all sales, whether paid in cash, on credit or through deferred payments. That means that the number of invoices for a given month may not match the amount of VAT reported to SAT if sellers have received credit payments or have accepted late payments from previous transactions. The payment receipt add-on closes the information gap between the number of payments received and the number of transactions in a given period.

Withholding and payment information certificates: these are used to report on tax withholdings applied at the time of making payments for which a withholding certificate must be issued. This type of certificate also applies when withholdings are made for payments abroad, royalties, sale of shares, dividends, or distributed profits, among others.

Related certificates: these are tax certificates that are related to other previously issued certificates of the same type. They are necessary, for example, when a credit note is issued due to an error in its content, or when a transfer CFDI is issued for merchandise that has already been paid for and for which it is necessary to include a reference to the original CFDI.

CFDI Supplements: In addition to the types of invoices or CFDIs mentioned above, Mexican tax legislation requires that when certain transactions are carried out, additional information must be provided, specifying the type of transaction in question. This type of additional information is contained in the so-called “complementos”, which are attached to the original CFDI. The main complements of the invoices or CFDI are the following:

Airlines
Proof of destruction
Foreign trade
CFDI Tax Registry
Purchase and sale of foreign currency
Fuel consumption
Donations
Fuels statement of electronic purses
Complement of Hydrocarbons

INE
Private educational institutions
Tax captions
Notary public
Works of art and antiques
Other duties and taxes
Payment in kind
Individual member of a coordinated group
Receipt of payments
Payroll payment receipt

Vehicle refurbishment and replacement
Retail sector (Retailer)
Partial construction services
Third party to third party SPEI
Digital tax stamp
Foreign tourist passenger
Food vouchers
Used vehicle
Sale of vehicles

In other cases, the requirement to issue a supplement to the CFDI is due to withholdings made at the time of making payments for specific transactions. These supplements are the following:

Disposal of shares
Dividends
Interests
Leasing

Payments to foreigners
Prizes
Non-business trusts
Retirement plans

Mortgage interest
Derivative transactions
Financial sector

Essential Components

Both the Tax Code (Código Fiscal) and the current Miscellaneous Tax Resolution (Resolución Miscelánea Fiscal, RMF) establish a series of essential conditions with which CFDIs must comply. Annex 20 of the RMF details the technical requirements with which CFDIs must comply, both in terms of content and format, as well as syntax. In terms of content, we detail some of the most essential components for income CFDIs:

Header: used to identify the issuer, its RFC, tax regime, date, and place from which the CFDI is issued, folio or UUID assigned, SAT digital seal, information on the receiver, RFC, etc. In the case of transactions with the general public, a generic RFC must be provided.
Item detail: description by code of the goods and services sold, quantity, unit of measurement, etc.
Form and method of payment: you must choose from a catalogue, informing whether payment is in cash, check or some other method, as well as whether it is in a single payment or in installments or deferred.
Value consigned: includes the value for each good or service detailed in numerical format.
Commissions and other charges: mandatory field for invoice settlements.
Discounts and surcharges: identify total discounts or surcharges.
Informative subtotals: optional fields to report subtotals.
Type of payment made: a) one-time payment (cash); b) payment in installments; c) other form of payment.
Reference information: identifies the documents associated with the issued.
SAT digital stamp.
Signature with a valid advanced electronic signature certificate.
Date and time of the electronic signature.

In the case of the printed representation of the CFDI, it must comply with certain minimum conditions established by the Tax Code and the RMF.

Two-dimensional barcode or QR generated according to the technical specification established in item I.D. of Annex 20 or the fiscal folio number of the receipt
Serial number of the issuer’s and SAT’s Digital Seal Certificate
The caption: ‘This document is a printed representation of a CFDI’
Date and time of issuance and certification of the CFDI
Original string of the digital certification complement of SAT

It is important to point out that the requirements indicated above apply to CFDIs de ingresos (income CFDI). Other CFDIs issued on transfer, payment, payroll, expenses or related, contain other additional requirements or substitutes for the above. Likewise, there are other optional requirements depending on the type of good sold OR service. For example, in the case of sales of vehicles, foreign currency sold by exchange houses, donations or disbursements on behalf of third parties, additional information to those indicated above will be required in the CFDI issued.

Processes

Validation

In order for a CFDI to be legitimate, it must be duly validated before the SAT or by the Authorized Certification Providers (PACs) before being sent to its recipient. For this validation process to be possible, the CFDI must comply with the essential format conditions defined in Annex 20 above:

a) The generated XML file must comply with the technical conditions of format and syntax established in the Miscellaneous Tax Resolution and its technical annexes.
b) Said CFDI must pass the validation rules established for the content and format of the XML file generated.
c) In case the CFDI contains additional supplements required according to the type of transaction or parties involved, such attachments must also comply with the validation rules established by law and the RMF. All this requires that the electronic file of the CFDI is duly referenced to the XSD scheme specified according to the path published by the SAT.

In general, CFDI validations are not performed directly by the SAT (with few exceptions), but by PACs. A PAC is the legal entity authorized by the Tax Administration Service to review the integrity of the XML file, ensuring that it complies with the current technological standard defined by the SAT. In addition, it is obliged to send the authority a copy of the CFDIs validated by its clients. Once the corresponding validations have been performed, the PAC will assign the corresponding fiscal folio -also known as UUID- and will stamp or certify the XML file, thus converting it into a digital invoice. This process is always done electronically and 100% digitally.

Tax Mailbox

The fiscal mailbox is a digital messaging system installed in the SAT’s web portal, through which the SAT communicates with taxpayers and taxpayers must use to communicate with each other, especially in matters related to invoices received and issued. The notification, acceptance, or rejection of the cancellation of the CFDI by other means is not valid for tax purposes in Mexico. Acceptance may be express or tacit.

CFDI Cancellation

The CFDI cancellation process is currently regulated by the Rules of the Miscellaneous Tax Resolution and Article 29A of the Mexican Tax Code, which provides two basic processes for the cancellation of a CFDI: one that requires the authorization of the invoice recipient through the fiscal mailbox (tax mailbox) and one that does not. The cancellation can be made no later than the last day on which the income tax return must be filed.

By default, the recipient of an invoice is required to accept its cancellation for it to proceed; however, according to Rule 2.7.1.35 of the Miscellaneous Tax Resolution, there are twelve cases in which exceptionally the acceptance of the counterparty will not be necessary:

The amount of the invoiced transaction does not exceed MX$1,000.00
The sales are to final consumers
The sales are to residents abroad
Payroll
For expenses (credit note)
For concept of transfer
When the CFDI to be cancelled contains withholdings and payment information
When the cancellation is made within the following business day
Por concepto de ingresos expedidos a contribuyentes del RIF (actualmente RESICO)
For income issued to RIF taxpayers (currently RESICO)
When the CFDI is issued by governmental organizations
In the case of certain CFDIs of income issued for agricultural activities and others

As of January 2022, when the CFDI must be cancelled, the cause of cancellation must be indicated in the cancellation request. These causes of cancellation are the following:

Receipts issued with related errors.
Receipts issued with unrelated errors.

The operation was not carried out.
Nominative operation related to a global invoice.

When the purpose of the cancellation of the CFDI is to replace it with a new one, the new CFDI must make reference to the cancelled CFDI and vice versa.

It should be noted that according to the current Tax Code, the CFDI may only be cancelled in the same year in which they are issued. However the authority may establish other facilities such as the one established in Rule 2.7.1.47 of the current RMF, which establishes that the cancellation of the CFDI may be made no later than the month in which the annual ISR declaration corresponding to the fiscal year. In this instance, the aforementioned receipt issued must be submitted.

Penalties

Mexico provides a wide range of penalties for those who fail to comply with the electronic invoice obligations established in the Federal Tax Code (Código Fiscal de la Federación or CFF) and in the current Miscellaneous Tax Resolution (Resolución Miscelánea Fiscal). In general, these penalties correspond to fines applied according to the seriousness and periodicity of the violations. Articles 81 section X in relation to 82 section X, as well as the various 83 section VII, IX, XI, of the current Miscellaneous Tax Resolution. It should be noted, however, that in certain serious cases, both the Tax Code and the Miscellaneous Tax Resolution establish that the SAT may sanction violators with the closing of the establishment from which such violations are committed.

Evolution of the Electronic Invoicing Law in Mexico

Legal Framework

The general obligation to issue CFDIs is defined in the Mexican Tax Code (Código Tributario de México), also known as the Federal Tax Code (Código Fiscal de la Federación). Article 29, paragraph II, requires taxpayers to issue CFDIs using the formats established for this purpose by the Tax Administration Service (SAT). These provisions are more detailed in the Regulations of the Federal Tax Code.

Miscellaneous Tax Resolution in force

The technical details of the CFDI are established in a decree issued annually, known as the Miscellaneous Tax Resolution (RMF). In such resolutions, the tax administration sets forth the technical conditions that such electronic documents must comply with, the term for their remission, validation process and others. Rule 2.7.1.2 of the RMF requires that the CFDI, and the digital stamps for the same, comply with the technical rules established in such resolution.

SAT Publications

The SAT periodically issues technical publications aimed at changing the content of CFDIs. The schemes, files, guides, and other documents necessary to comply with the electronic invoicing mandate are regularly updated by the SAT and published on the SAT's website.

Latest Regulatory Changes in the Country

Mexico: CFDI version 3.3 can be used until 31 March 2023

Learn More

Mexico: SAT updates error matrix for CFDI 4.0

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Mexico: Modifications to miscellaneous tax resolution 2022 and its annexes 1 and 1A

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Electronic invoicing in Colombia

Electronic invoicing in Colombia, often referred to as Colombia facturacion electronica, is mandated for established taxpayers. While it was an early mover in giving legal weight to e-invoices, Colombia’s mandate only came into effect in 2019 and has been subject to change since.

Understanding the specificities of the rules of overall tax compliance is vital. That’s why Sovos’ regulatory experts have produced this complete overview of Colombia e-invoicing. Bookmark this page to stay up to date with the latest requirements.

1. Characteristics of electronic invoicing in Colombia

2. Electronic invoicing law in Colombia

3. How does an e-invoice work in Colombia

4. Benefits of using e-invoicing in Colombia

5. Timeline of e-invoicing in Colombia

6. Penalties: What happens if I don’t comply to e-invoicing in Colombia?

7. How to choose the right e-invoicing software in Colombia?

8. Setting up e-invoicing in Colombia with Sovos

9. FAQ

10. Additional resources

Characteristics of electronic invoicing in Colombia

Colombia B2B e-invoicing

All companies are required to issue electronic sales invoices with prior validation before issuance. Companies must enable themselves as electronic issuers through the web portal assigned by the DIAN.

Suppliers must also certify as Technology Services Providers (PST) and receive a unique software identifier. The standard format used is XML, following the UBL V2.1 (Universal Business Language) adopted by the DIAN.

A digital signature is mandatory to ensure authenticity and integrity throughout the invoicing process.

Invoices must use a consecutive numbering system assigned by the DIAN, along with a Unique Electronic Invoice Code (CUFE) for identification and data integrity. Issuers must create a graphic representation of the invoice in PDF format, including a QR code.

Both issuers and recipients must archive invoices for the period established by the tax statute.

Colombia B2G e-invoicing

Starting in November 2020, electronic invoicing became mandatory for all taxpayers – including B2G transactions. All suppliers must issue electronic invoices and buyers are required to receive them. Buyers do not need to validate the invoice, but they can accept or reject it.

Electronic invoices (Facturas electrónicas)

The electronic invoice is the evolution of the traditional invoice. It has the same validity as paper in a legal sense, but it is generated, validated, issued, received, rejected and preserved electronically. In tax terms, it supports sales transactions of goods and/or services.

All electronic sales invoices for tax recognition must be validated prior to their issuance by the Special Administrative Unit of the National Tax and Customs Directorate (DIAN).

The electronic sales invoice will only be classed as issued when it is validated and delivered to the purchaser – providing it also complies with the conditions, terms and technical and technological mechanisms established by the DIAN.

Electronic equivalent documents (Documentos equivalentes electrónicos)

In the context of electronic invoicing in Colombia, equivalent documents are digital receipts issued by the DIAN (National Tax and Customs Directorate) for transactions that do not require a sales invoice.

The Electronic Equivalent Document is defined as a document that:

Contains the information of a commercial operation carried out by a subject that is not required to issue an electronic invoice
Complies with legal requirements
Is generated and transferred electronically through a technology provider authorised by the DIAN

Adjustment notes are included for the electronic equivalent document and have been created as a mechanism for their cancellation or correction.

Electronic sales receipt

An electronic sales receipt is a receipt that is issued to final consumers. It does not generate tax credit and its structure is less complex than electronic invoices.

Electronic debit and credit notes

Credit and debit notes are documents that allow adjustments or corrections to be made to electronic invoices. They must be generated and transmitted electronically to the DIAN for validation.

Document for payments in favour of non-VAT responsible

This document is a type of invoice that must be issued by the buyer when purchasing goods or services from persons not responsible for VAT.

Export and import electronic invoice

These documents must be issued to support export and import operations, in addition to other documents related to customs operations.

Electronic invoicing law in Colombia

Electronic Invoicing is mandatory in Colombia for businesses that are registered for Value Added Tax (VAT).

The mandate follows a pre-clearance model which came into effect in January 2019, starting with large taxpayers. It became mandatory for all taxpayers as of November 2020, covering B2G, B2B and B2C transactions.

Colombia requires suppliers to issue e-invoices and buyers have to either accept or reject them, though they do not need to validate the document. DIAN, the country’s tax authority, must clear the electronic invoices before they can be sent to the buyer – without clearance, the receipt cannot be issued and the goods cannot be shipped.

For more specifics on Colombia facturacion electronica (e-invoicing), read on.

Types of Operations Subject to the Colombian Electronic Invoice Regime

The electronic invoicing mandate in Colombia applies to the following documents and transactions:

Electronic invoices: Required in B2B transactions and when generating tax credit. The validity of this document is subject to strict compliance rules covering structure, issuance and validation.

Electronic equivalent documents: The following are currently considered equivalent to electronic invoices:

Tickets for cash registers with POS systems
Cinema admission tickets
Passenger transport tickets
Extracts issued by financial and similar institutions for financing operations
Air transport tickets
Documents in localized games of slots, bingo, casinos and the like
The ballot, fraction, cardboard, forms or the like in games of luck or chance
Documents issued in the collection of tolls
Settlement receipts issued by the Colombian Stock Exchange
The document of operations of the agricultural exchange and other commodities
Documents issued for home public services
Income tickets for public shows

Electronic sales ticket: The voucher issued to final consumers. It does not generate tax credit and its structure is less complex than electronic invoices.

Electronic debit and credit notes: Issued by the seller to recover expenses or accredit cancellations, discounts or other modifications to issued electronic invoices and tickets. Like electronic invoices, such notes must be pre-validated.

Document for payments in favour of the non-VAT-responsible: A type of invoice that must be issued by the buyer when purchasing goods or services from people not responsible for VAT.

Receipt for work income: Must be issued according to the format established in the technical documents of the electronic invoice when disbursements related to the taxpayer’s payroll are made, including parafiscal and social security contributions.

Electronic export and import invoice: Must be issued to support export and import operations, in addition to other documents related to customs operations. So far, only electronic export invoices have been developed and put into production.

Other documents: Expense support documents, deductions and other types of electronic media that facilitate compliance with tax obligations.

XML schema based on UBL 2.1

The standard e-invoicing format for e-invoices in Colombia is XML. This format follows Universal Business Language (UBL) V2.1.

The XML document is generated, comprised of the information that Colombia’s tax authority requires, and then signed with a digital certificate. From there, the taxpayer’s certified software validates the data, as well as both the issuer and recipient, and reports the transaction to the DIAN.

The tax authority will then record the document, assign a unique e-invoice number, notify the issuer that it has been processed successfully and deliver the XML to the issuer.

Unique electronic invoice code - CUFE

The Clave Única de Facturación (CUFE) code enables electronic invoices to be identified unequivocally. It’s also known simply as a unique electronic invoice code and is comprised of data from an invoice and the Technical Control Content Key provided by the tax authority.

The CUFE code also ensures the integrity of documents by using SHA384 encryption.

QR code

As well as being in the XML format with a digital signature and unique e-invoice code (CUFE), valid e-invoices in Colombia must include a QR code. This is mandated by law and is possible via certified technology providers like Sovos.

For customers who cannot receive electronic invoices, they are sent a QR Code invoice for the transaction.

Electronic container

One of the changes in Resolution 000012 saw the DIAN modify the e-invoicing law to implement the use of the electronic container. The electronic container is a mandatory electronic instrument used to include the information of the electronic sales invoice, debit notes, credit notes and general electronic information derived from the systems of billing – along with the validation carried out by the DIAN where applicable.

This modification means that e-invoices must utilise digital signatures to guarantee the authenticity and integrity of the document. The issuer must digitally sign the invoice to the standards laid out by the regulation and the tax authority’s signature policy.

How does an e-invoice work in Colombia?

Colombia’s electronic invoicing system contains multiple processes that the electronic biller, the DIAN, the technology providers and the electronic receivers or purchasers participate in.

Once the electronic biller complies with the authorisation requirements, they can start generating electronic invoices and equivalent documents.

Among the most important processes of this generation system are the following:

Validation: Colombia’s current electronic invoicing system requires invoices, and other documents issued by the person responsible for electronic invoicing, to be validated by the DIAN before being issued to their recipient.

Once this process is completed, the DIAN will proceed to register the electronic document in its databases with the value “document validated by the DIAN” while generating, signing, storing and sending a validation message to the electronic biller for its issuance and delivery to the acquirer.

Receipt of electronic documents: Electronic billers must also act as electronic receivers. To do this, they must establish an email to receive electronic sales invoices issued by their suppliers and other documents subject to the electronic invoice mandate.

This obligation is fulfilled by issuing an acknowledgement of receipt by the recipient and should only be done when the document issued has been validated by the DIAN. From a commercial point of view, if the recipient of the document agrees with the document received then they must formally accept it.

If the document does not comply with the commercial conditions agreed with the supplier, they must commercially reject the document and the associated acknowledgement of receipt issued. If, after receiving the document, the recipient does not reject it within three working days from the day indicated in the deliveryDate field (or in the issueDate field), the document will be considered tacitly accepted.

Contingency: The current electronic invoicing legislation states that if the taxpayer is unable to issue an electronic invoice, or any of the other equivalent documents, due to technological problems attributable to the DIAN, they may issue the document supporting the transaction without the validation of the DIAN.

These documents may be invoices in a paper checkbook. In such situations, the taxpayer must use the billing ranges authorised by the DIAN. After the contingency situation is over, the obligor will have a period of 48 hours to send these documents to the tax authority for validation.

The RADIAN: RADIAN is an information system that allows the circulation and traceability of e-invoices as a security title, hereinafter referred to as an electronic sales invoice value title.

Once an electronic sales invoice becomes a value title and is registered in RADIAN, negotiation is possible for the legitimate holder and/or through agents and/or operators authorised by the Ministry of Commerce, Industry and Tourism.

There are other processes aimed at guaranteeing the negotiation, transfer, endorsement and execution of said document.

Issuance and delivery of the sales invoice and/or the equivalent document: The issuance of the sales invoice or equivalent document includes its generation, transmission, validation and delivery to the purchaser for each of the sales operations and/or provision of services carried out.

The issuance of these documents must comply with the applicable legal requirements, as well as with the special requirements and the conditions, characteristics, terms and technical and technological mechanisms developed by the DIAN.

Benefits of using e-invoicing in Colombia

There are a host of benefits that come with e-invoicing, including:

Timeline of e-invoicing in Colombia

1995: Colombia gives e-invoices the same status as paper invoices
18 April 2016: Pilot project launched with 58 companies
January 2019: E-invoicing becomes mandatory for large VAT-registered businesses
February 2023: Large taxpayers required to issue electronic sales invoices for cash register tickets over 5 UVT
November 2020: E-invoicing becomes mandatory for all VAT-registered businesses
March 2023: Decree 442 introduces changes to electronic invoice regulations
March 2023: Taxpayers that file for income and complementary tax must issue electronics sales invoices for cash register tickets over 5 UVT
April 2023: Taxpayers that do not file for income and complementary tax must issue electronics sales invoices for cash register tickets over 5 UVT
June 2023: All taxpayers must issue electronics sales invoices for cash register tickets over 5 UVT
November 2023: Resolution 165/2023 introduces more changes to e-invoicing regulations
November 2023: Calendar of implementation of Electronic Equivalent Documents is postponed until 1 May
1 February 2024: All taxpayers in scope must have implemented the latest electronic sales invoice rules by now

Penalties: What happens if I don’t comply to e-invoicing in Colombia?

Those who do not meet the requirements of Colombia’s e-invoicing mandate may well face repercussions.

The current sanctioning system of the regime of Colombia is regulated by the provisions of article 652-1 of the Tax Statute, which basically provides for two types of sanctions. Non-compliance may result in fines of up to 1% of the value involved in invalid invoices, or the closure of establishments for up to 30 days.

How to choose the right e-invoicing software in Colombia?

When choosing e-invoicing software for Colombia, it’s crucial to consider the future. The DIAN has already introduced changes to the electronic invoicing regulations and there is a high probability that more alterations will come. The ideal compliance partner is one that combines technology with knowledge, flexibility and foresight – a partner that evolves as regulations do.

Another consideration should be the nature of your business. You could choose a point solution, but it’s more efficient to use a solution that covers all facets of tax compliance – not just in Colombia but everywhere you do business. Sovos can help.

What else do I need for VAT compliance in Colombia?

Businesses that provide taxable goods or services in Colombia may need to register for VAT. The VAT registration process is done through the single tax registry (RUT). Once registered, the taxpayer identification number (NIT) is obtained.

Foreign businesses cannot directly register for indirect taxes in Colombia as non-residents. Foreign traders must form a permanent establishment in Colombia and register for indirect taxes.

FAQ

What is electronic invoicing in Colombia?

In Colombia, all VAT-registered businesses are required to send and receive invoices electronically. All taxpayers must establish themselves as electronic invoice issuers through the tax authority’s web portal and then issue e-invoices for transactions.

Is e-invoicing mandatory in Colombia?

Colombia’s e-invoicing regime is mandatory for all businesses that are registered for VAT. That said, there are some exclusions like financial institutions, companies with an income below a particular threshold and other segments of business.

Who needs electronic invoicing in Colombia?

Any VAT-registered business that is established in Colombia is required to meet the demands of the tax authority’s electronic invoicing mandate.

How can I view an electronic invoice received in Colombia?

You can view the electronic invoice in two ways:

Using a software authorised by the DIAN to open and verify the electronic container. The software must be able to read the XML format and the digital signature of the invoice. You can use the free DIAN upload portal or a third-party software provider.

Scanning the QR code of the invoice with your smartphone or tablet. The QR code will redirect you to the DIAN website, where you can see the invoice details and download it in PDF format.

What is DIAN registration, testing and enablement?

DIAN registration, testing and enablement are the steps that a taxpayer must follow to become an authorised issuer of electronic invoices in Colombia.

The process consists of the following stages:

Registration: The taxpayer must register in the Unique Tax Registry (RUT) and obtain a digital certificate to sign the electronic invoices. The taxpayer must also choose a software provider to generate, transmit and validate the electronic invoices.

Testing: The taxpayer must perform a series of tests to verify the correct functioning of the software and the compliance with the technical and legal requirements established by the DIAN. The tests include the generation, transmission, validation and consultation of electronic invoices – as well as the management of contingencies and errors.

Enablement: Once the taxpayer passes the tests, the DIAN will enable the taxpayer to issue electronic invoices in the production environment. The taxpayer will receive a notification and a number of authorisation of numeration (NAN) to start issuing electronic invoices.

How is the monthly billing value composed?

The monthly billing value is calculated by adding the net sales value, the VAT value and the consumption tax value. The monthly billing value must be reported to the DIAN through the electronic invoicing system and must be paid within the deadlines established by the DIAN.

Is Sovos authorised by the DIAN?

Sovos is certified by the DIAN to provide e-invoicing technology and solutions to eligible taxpayers in Colombia.

Setting up e-invoicing in Colombia with Sovos

With electronic invoicing becoming more common globally, following the lead of Latin American countries like Colombia, it is important that you prioritise compliance.

The global – yet fragmented – adoption of e-invoicing solidifies the need to choose a single vendor for complete compliance, wherever you do business. Sovos is a tax compliance partner you can trust.

Focus on what truly matters: speak with a member of our team today to begin reclaiming your time.

Complete the form below to speak with one of our e-invoicing experts

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