If your company is currently doing business in Latin America, then you’re no stranger to the complex and ever-changing fiscal compliance regulatory environment. The compliance momentum won’t subside in 2017, with major initiatives planned in Brazil, Colombia and Mexico. Let’s examine what’s in store.
Block K – Requiring significant changes to the way companies manage inventory, Block K is required for the largest companies (revenue of approximately $94 million USD or more) in Brazil starting January 1, 2017. This new mandate involves monthly inventory and production reports with detailed tracking of stock movement, raw material usage and more. This requirement will continue to roll out based on revenue size over the next two years, with all companies required to comply by January 1, 2019.
eSocial – Mandated for companies with revenues exceeding $24 million USD beginning January 2018, eSocial will then be required for all companies in Brazil in June 2018. This mandate requires companies to submit details on labor events, including employment status, social security, wages, medical leave, warnings and suspensions, and more. Like Block K, this mandate requires major changes to operational processes surrounding the ways employers track labor events, which means preparations need to begin this year.
Factura Electronica – Mandated e-invoicing will begin in Colombia in 2017, after the successful completion of its pilot program at the end of October 2016. By 2018, Colombia expects to have all companies participating in the e-invoicing program, with companies being mandated to comply based on industry, revenues, transaction volume, assets and IVA refunds.
CFDI v.3.3 – In December 2016, Mexico announced the largest change to its e-invoicing schema in years. Under CFDI v.3.3, companies with operations in Mexico will have to implement 23 new validations, including changes to time zone, payment types and currency classifications. The new schema must be in effect by July 1, 2017, so companies need to start examining their compliance strategies now.
Increasing electronic audits – Since launching its electronic audit process in September 2016, Mexico has already levied 5,358 fines for a total of 55.8 million pesos. The SAT, Mexico’s tax authority, plans to continue to increase the frequency of these audits, with the end goal of all audits moving to this process to improve efficiencies and reduce errors. As these audits become more prevalent in 2017, companies need to be aware that no errors will go unnoticed, meaning compliance processes must be 100% seamless and accurate in order to avoid fines, penalties and operational disruptions.
AEOI – The Automatic Exchange of Information for Tax Matters (AEOI) launches in dozens of countries in 2017. This new reporting standard facilitates the exchange of critical tax information across borders in order to better identify tax fraud. In Latin America, this Common Reporting Standard (CRS), goes into affect in Argentina, Colombia and Mexico in 2017, and Brazil, Chile, Costa Rica and Uruguay in 2018. AEOI is just one example of increasing globalization of tax law enforcement, and we can expect continued initiatives to facilitate cross-border information sharing in the coming years.
While these are the major 2017 Latin American compliance initiatives we see so far in 2017, we expect several additional changes as the year progresses. For the latest updates on these changes and more, subscribe to our blog.