Chilean SMEs migrate to e-invoicing

Today, August 1, is the deadline for small and medium-sized businesses in Chile to take up e-invoicing. The obligation affects all companies located in urban areas that earned between 2400 UF and 100,000 UF in the past year. In total, it is estimated that some 90,000 SMEs meet these requirements and, from now on, may only use the Electronic Tax Document (DTE).

To avoid confusion, the Internal Revenue Service (SII) has included a checking tool on its website so that companies can check if they are designated e-invoice issuers or not. Bear in mind that failure to comply with the rules can lead to sanctions for these taxpayers and serious difficulties when it comes to billing for their products or services. To this end, the SII will allow a short deadline extension to companies that are still in the software implementation process.


Country at the cutting edge

Chile is currently one of the world’s most advanced countries in e-invoicing uptake. In fact, it was the first Latin American state to introduce this system in 2003. Over the years, thousands of taxpayers voluntarily decided to join the DTE in order to boost efficiency and cut economic costs. However, in 2014 the SII decided to make it mandatory through Law N°20.727, with a view to promoting widespread use and maximizing the benefits.

To facilitate migration, the regulations set out a gradual inclusion in the DTE scheme. As it stands, this technology is already mandatory for large companies (which joined up in November 2014) and for urban SMEs, starting today.

The next step will be the rollout of e-invoicing in medium-sized rural enterprises and urban microbusinesses. The deadline for these taxpayers extends until February 2017. One year later, in 2018, the drive towards widespread use of DTE will be completed with the inclusion of rural microbusinesses.


How to issue DTE?

EDICOM has created an e-invoicing platform that enables companies to fully automate the process of creating, sending, declaring and storing invoice receipts. This solution is adapted to the requirements set out by Chilean regulations and integrates with the company’s ERP or management system, so there is no need to modify internal working procedures. As a result, taxpayers enhance security, are more efficient and save on economic costs arising from the use of paper.

Chile, benchmark country for e-invoicing in Latin America with almost 100,000 companies

Chile has become a country of reference for e-invoicing use in Latin America. The report emphasizes Chile’s leadership in e-invoicing uptake, which in August 2014 had reached a figure of 93,007 SMEs now applying this new billing method. Growth in Chile has been spectacular, and in the period from 2005 to 2014, the number of companies soared from 2,200 to over 93,000, a figure that may have risen exponentially in the second half of 2014 and the first few months of 2015 to pass the 100,000 barrier.

These electronic invoices or merely legal digital documents regulate purchasing and sale transactions for goods or services, where the vendor issues an electronic invoice to the buyer through a digital platform designed for this purpose.  Everything takes place in the regulatory context of the tax authorities and state, which play a vital role in fiscal control thanks to this new tool.

The ANIF report highlights the important benefits of this system in terms of its application in other Latin American countries, in clear imitation of Chile as reference country. These include greater funding facilities for what are known as MSMEs – micro, small and medium-sized businesses – thanks to factoring, cost-cutting on invoice printing and invoice storage tasks as well as their distribution, tighter fiscal control, less tax evasion, increased tax revenues with money to be channeled into improvements to society, much more efficient negotiating processes between businesses and between companies and individuals and the state, and faster business transactions.

ANIF points to Chile as a pioneering country in the rollout of e-invoicing over a decade ago, when in 2003, under Law 19.799, e-invoicing in Chile was a purely optional service and promoted from two sides. By the Internal Revenue System or SII and the Mime portal, with free access for this type of businesses, and private companies supplying electronic billing software and which are authorized by the government.  However, in 2014 Law 20.727 modified this optional service, making it a mandatory obligation for all taxpayers, something that does not happen in all other countries in Latin America. The measure is being applied gradually, by company size, until the start of 2017, with special attention to those taxpayers located in special geographic areas, without electrical power or data networks.

Countries such as Brazil and Mexico have moved forward on the basis of the Chilean model, notably with the recent obligation for natural persons to use electronic invoices (particularly in Mexico).  In conclusion: there are now more than a million e-invoicing users both in Mexico and Brazil, countries with far greater geographical spreads than Chile.

The e-acknowledgment as a tool to access tax credit in Chile

The application in Chile of Law 20.727, designed to generalize the use of electronic invoicing, will mean the transformation of numerous transactions and administrative procedures currently in common use. The use of tax credits by citizens is one of them.

How will the law affect access to tax credit? The ruling not only simplifies and modernizes citizen relations with the administration, but also incorporates the so-called receipt acknowledgement as an access mechanism to tax credit in Chile. This means that the beneficiary of said credit will have access to it only during the period for which they issue the acknowledgment electronically.

This revolutionizes the way to access this kind of tax credit, and although it is true that the law already included it previously, it did not call for the provision of a receipt acknowledgement as a prerequisite to making use of the tax credits obtained. This way, the beneficiary of a tax credit in Chile will be required to carry out this procedure electronically, also as another means of physical control.

This is one of the great guiding principles of implementation for electronic invoicing in Chile, promoting and facilitating tax compliance by citizens. They, in turn, may make proper use of these tax credits reloaded into electronic documents. Only purchase receipts and waybills may continue to be issued on paper.

There are more exceptions. Law 20.727 on electronic invoicing in Chile exempts from its use those residents living in areas of the country without Internet coverage, with no access to electricity or who are in a place affected by a disaster and declared as such.

But beware. Despite this law, other aspects of the Law on Sales and Service Taxes  are still valid, concerning the use of the tax credit designated for use within the two tax periods following the month the document was issued.

10 keys to understanding e-Invoicing in Chile

As it stands today, many companies still have their reservations about the rollout of e-invoicing in Chile. For example, depending on the size of my business: When is the deadline for me to switch over to this new billing system? Which documents do I need to submit? How much does a digital certificate cost? … Here are the 10 keys to e-invoicing in Chile that you should know.

1. Number of companies

Chile currently has around 685,000 companies, of which 75% are micro-businesses, approximately 500,000. There are 150,000 small businesses, 25,000 midsized firms and 10,000 large corporations, categorized by annual sales revenue and in the case of the latter by profits reaching over 100,000 UF. Sooner or later, all of them will be required to use e-invoicing.

2. Mandatory compliance with Law 20.727

The universality of Law Nº 20.727 2014 states that electronic invoices and other tax documents are henceforth mandatory for all companies. It is a universal law and therefore binding, stipulating the replacement of paper documents used in their economic activities by electronic invoices.

3. Irrefutable deadlines

The deadlines for companies to adapt to e-invoicing in Chile will depend on annual income, but also on their location if they are in an urban or rural area. Big businesses were the first to sign up, with 1 November as their legal deadline for adaptation. Companies must be working with e-invoicing by 1 February, 2016 and micro businesses before 1 February 2017.

4. But do we need to renew the electronic invoice every year?

No. The only thing to be renewed is the Digital Certificate, related to the electronic signature associated with each document. But bear in mind that this renewal may not be for just 1 year; it may be for 2 years or more. Everything will depend on the contract signed with the service provider company.

5. Time to implement e-Invoicing in a company

Despite what we might think, rolling out electronic billing in Chile is not a transaction that takes too long. Due to their size, big businesses might take longer. A project might take a couple of months, but for smaller companies there are online solutions they can download and have up and running the same day.

6. e-Invoicing is expensive

The savings on paper and the benefits and convenience of e-invoicing in Chile is an issue already analyzed previously. The cost of a digital certificate in Chile may be around $14,000, but this is amortizable in a short space of time.

7. Which documents can be managed?

With the rollout of electronic billing in Chile not only invoices can be handled this way, but also other tax-related documents the company uses to go about its business. These may include: credit and debit notes, export documents and invoicing, e-vouchers, receipts and invoices… it all depends on the service contracted by each company.

8. Freedom of choice for each company

Each company can decide to contract a different plan for e-invoicing management and compliance in Chile. Nevertheless, the law stipulates that at least credit notes and debit cards, purchase invoices, other bills and invoice payments all come under its aegis.

9. MiPyme for small businesses

If you have a company with annual sales of over 500 million pesos, you can use the purpose-built MiPyme tool the SII provides. It is aimed at small taxpayers that issue few electronic documents.

10. Soon on your Smartphone

The SII (IRS) is currently developing a cellphone app so that companies can submit tax documents by smartphone. This makes it easier to send this type of documentation from anywhere with internet access, saving time and space… and likewise contributing to fiscal control. One forecast estimates that by 2017 there will be up to 17 million smartphones in Chile, a sure-fire benefit for the business world.

Taxpayers to be removed from e-Certification process in Chile if they do not use it in 6 months

There is no longer any need to leave home to manage different transactions with the administration. Now, with the purchase of software for e-invoicing in Chile, taxpayers can operate from home with their own software, or one acquired in the market, which can issue an e-invoice replacing the paper document. This e-document will have the same legal validity, while the taxpayer saves on transfer and processing time.

One of the biggest advantages of e-invoicing in Chile for taxpayers is the convenience of being able to carry out any type of administrative transaction from home. Or likewise, to create a tax document electronically, replacing the legal support and being able to issue e-invoices not only in Chile, but also debit notes, waybills, exempt invoices… to the Internal Revenue Service (SII).

To this end, the Chilean IRS (SII) has drawn up a Certification process for taxpayers to start operating with e-invoicing in Chile, where one of the main requirements is as follows: The SII will remove those taxpayers who report no business in the six months since their last activity from the electronic certification process. This way, the Internal Revenue Service intends to encourage people to use and sign up to the new mandatory invoicing model and to stop using paper. Moreover, if they have considered the process, it is because they intend to make use of it.

If a taxpayer is removed from the Chilean e-invoicing certification process, they must register and complete all steps of the procedure again in order to be able to keep using it. What are the steps to follow, both in this phase and any other? Having a trial set assigned by the SII, a simulation step and sending print samples, exchanging information with the Administration for validation, and the corresponding declaration of eligibility and authorization of the taxpayer in question. Following these same steps, the “expelled” taxpayer may go back to operating with e-certification in Chile.

Taxpayers using e-invoicing in Chile should send a sample of each electronic tax document they are using to the SII for validation with a digital signature by the issuer. The issuer must also receive electronically the other tax documents sent to them by other taxpayers in the course of their business. And every month, apart from those tax documents issued, taxpayer in Chile must also send their electronic purchases and sales information to the SII.