In the first of a series of posts about Latin American tax compliance, we blog about the intricacies of Brazilian tax law, and explain why Brazil is a world leader in electronic invoicing.
Heading to Rio de Janeiro for the World Cup final? Upon arrival at the airport you can book a taxi with a single click of a mobile app, which will automatically generate a digitally signed electronic invoice. Sounds clever? Welcome to Brazil: a global pioneer in electronic invoicing.
Brazil mandated e-Invoicing in 2008 and continues to pave the way for other countries looking to reap the benefits of fully automated invoicing.
You may not immediately think of Brazil, or other Latin American nations, as pioneers in electronic tax collection. However, this is one area where Brazil and its neighbours are streets ahead of their European and North American counterparts. And that’s due to necessity: Brazil has suffered enormous tax collection losses caused by fraudulent invoices, and something had to be done. That something was electronic invoicing.
How it works
The Brazilian invoicing process begins with a supplier sending a structured XML invoice, which must be digitally signed, via email. Invoices are sent in one of the following three formats:
- Nota Fiscal eletrônica (NF-e) is a goods invoice, and all taxes placed on goods are centralised by the Brazilian tax authority (SEFAZ). A printed DANFE (a shipment note containing the NF-e information) must also accompany the goods when they are transported. This note contains a barcode, which the relevant authorities can scan to check the validity of the goods
- Nota Fiscal de Serviços eletrônica (NFS-e) is a services invoice, and is perhaps the most challenging of all the Brazilian invoices. Taxes on these types of invoices are determined by the various municipalities across the country, of which there are currently over 5,000… and counting
- Conhecimento de Transporte eletrônica (CT-e) is a transportation invoice, which was mandated in 2012
It is the buyer’s responsibility to validate both the formatting and taxes on the received invoice, and failure to do so may result in fines of between 75% and 225% of the tax value on the invoice. Correctly calculating these taxes takes time and costs money, and is a huge burden for many businesses.
That’s where service providers like Tungsten Network step in. We complete the complex validation process on behalf of the buyer customers on our network, and ensure that invoices adhere to local tax rules. Buyers then receive a fully validated invoice, ready for them to store electronically. And as these validations are carried out in as close to real time as possible, our customers are free to concentrate on the important stuff.
Peace of mind and more free time – what more could a business ask for? Well if they’re Brazilian, they’d probably want a rematch of the World Cup semi-final (congratulations to our German readers and customers, and commiserations to the Brazilians). Unfortunately we can’t make that happen, but we can enable our customers to trade with confidence in Brazil and beyond.