Electronic invoicing in Latin America
From outside of Latin America, electronic invoicing in Mexico, Brazil, Argentina, Chile and the others, seems complex and mysterious. What information that is available to understand it is mostly in Spanish or Portuguese. For those of us who are a little rusty on our Spanish and Portuguese, even the English written information is difficult to grasp because the concept of e-invoicing in Latin America is fundamentally different to the concepts familiar to Europeans and North Americans. But for any business that trades in South America it is crucial to understand the new invoicing landscape.
Electronic Invoicing in Latin America
The rules are different in each country and the terminology used to describe the various components in the process are different. This makes it confusing but despite the differences, the Latin American countries have a great deal in common and as a first step in understanding how it all works, it is worth understanding the high level process that is common to all.
The electronic invoicing process
In Latin America, the government plays a central role in the electronic invoicing process. Whereas in Europe and North America, governments take a hands-off approach, in Latin America, the government is intimately involved at every stage of the process from the issuance of an invoice to receipt of goods and every step in between including spot checking invoice details of goods in transit.
The process starts with the supplier. The supplier must obtain a digital certificate from a local certifying authority. This certificate is used to provide a guarantee of authenticity of electronic messages. Upon preparing goods for shipment, the supplier send details of the goods, prices and taxes (invoice information) to the government in a defined standard XML message. This data is used to create an electronic invoice which the government stores and the electronic invoice is sent back to the supplier.
(There’s an important point to be made here. The local nuances get lost in translation when simplifying this process and attempting to explain it in European or North American terms. Strictly speaking, the government does not create an “electronic invoice”. In Mexico it creates a Comprobante Fiscal Digital por Internet, CFDI or Digital Tax receipt. In Brazil, it’s a Nota Fiscal Eletronica or NFe which translates more closely to electronic invoice. Neither are quite the same as what a European of North American would think of as an e-invoice – the electronic version of a paper invoice prepared by a supplier and sent directly to customers.)
The next step is to ship the goods. The goods need to be shipped with a printed version of the invoice. At any stage of the jouney between supplier and buyer, customs officials or police officers can demand to see the paper version of the invoice. This can be checked with the centrally held government records. Failure to supply valid details could result in the good being seized.
Upon delivery, the buyer is obliged to validate the invoice that is received with the goods and also to confirm receipt of the goods.
By maintaining a central record of invoices, the tax authorities in Latin America have visibility of every business transaction that takes place. This would certainly be seen as heavy handed or even intrusive in many parts of the world but as a means of policing the payment of business taxes, it is a very effective way of using 21st century data management tools and techniques to maximise tax revenue and eliminate fraud.
Pete Loughlin can be found on twitter @peteloughlin