Tax Compliance with Managers and the CEO

 

Watch the full webinar here https://youtu.be/C7-RP7ISuKg

Baz: Hi this is Baz with LatamReady for the LatamZone webinar. Check it out we are in a different location and we’ve got some things on the table. First of all before starting let’s introduce ourselves. I’m Baz, we’ve got Glenn our sales manager at LatamReady and Carlos Z our CEO and president at LatamReady. Where are we, Carlos?

Carlos: We are in a secret location!

Baz: Today’s topic is very interesting and it’s related to what’s on the table today. We are talking about tax compliance and today’s webinar topic is drinking tequila while talking about tax compliance.

Screen Shot 2019-03-04 at 11.49.30 AMCarlos: The first question is going to be, why are we doing this? You are in charge of marketing Baz!

Baz: We want to get out of obscurity, we want to be seen as something different

Glenn: I think Baz was tired of being boring. What makes things interesting? Throw a little bit of alcohol

Carlos: We are going to connect culture with what we do. We connect customers from the States to the cultural tax compliance perspective of what they will find in Latin America.

Baz: I think the best way to start is to drink a shot of tequila

Glenn: Cheers!

Carlos: Cheers! What are we drinking?

Glenn: You tell me!

Carlos: ‘Tres Generaciones Reposado’

Glenn: I think that’s a very good bottle!

Baz: I’ll wash it down with some of this…

Carlos: agua de jamaica, it’s actually a flower!

Glenn: I’m going to do the same thing because that was strong

Baz: Ok so let’s begin! What are the main tax compliance challenges that are experienced when expanding to that region?

Carlos: I would say that translation is the first challenge, but not only translation between languages. In Latin America, our customers from the US and UK will find Spanish, Portuguese a little bit of English. But the real challenge will be accounting translation and the terminology. What is a libro mayor, which is a daily book. What is  profit and loss legally speaking in Peru? These translations are real challenges.

Baz: In the US it’s completely different, right?

Carlos: Yes it’s completely different!

Glenn: I think what most international customers are surprised about are things like withholding taxes. There are so many tax regulations and accounting rules that do not exist in the US. As soon as the company expands to Latin America they start learning about these things. They need a company or someone to partner up with that knows what they’re talking about and that has had that experience with someone like NetSuite.

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Carlos: This week there are a lot of changes in Brazil. Withholding taxes are a big challenge in Brazil. It’s completely different from what you’ll find in the rest of Latin America.

Glenn: Customers are always surprised by how complex Latin America is. That’s what we try to do in our webinars. We try to show them that there are companies like LatamReady with years of experience, dealing with international companies, understanding their business model and bringing them to Latin America making sure that they have a partner to trust that can help them with tax advice and tax compliance. Of course, managing that from within the software that they were already using.

Carlos: To summarize the challenge is the translation of languages and terminology. The second challenge is about rules and electronic invoicing. Other interesting topics are withholding taxes, taxes, sales taxes, legal ledgers, etc.

Glenn: Specific legal ledgers, mandatory chart of accounts defined by the local government. That’s something that doesn’t exist in the US for example.

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Carlos: That’s the case for Peru and Colombia. The rules for accounting are different. Now we’re working with a customer from Mexico that’s dealing with traslado de IVA which is a specific accounting rule that applies sales taxes. This is something that will not find in the US or in the UK.

Baz: So it’s really important to have a team who has local knowledge to help you through this process. I would like to dig deeper into electronic invoicing in Latin America because it’s a big challenge there.

Carlos: What is electronic invoicing? Electronic invoicing actually should be called electronic documents. This refers to the legal requirement for issuing an invoice, a debit memo, a credit memo, a withholding tax certificate via XML. XML is a very specific file that should be issued by every single company when selling. For example, if I sell something to Glenn I have to issue an electronic invoice that is actually an XML file

Glenn: And therefore I need to receive that file. Every invoice you create in a Latin American country, where electronic invoicing is mandatory, has to have a legal XML file that represents the information from that invoice. That file goes to the tax authority, they approve that so they’re in full control of every transaction that’s being made. It’s all about control. That’s the reason why are there so many tax laws. The whole region is adopting this methodology.  

Carlos: Imagine you’re distributing a product in Brazil. If the authorities ask you what you’re carrying, you have to present a PDF, which is the representation of the XML file. The authorities will scan that and verify all your information online. The governments want online control.

Glenn: It’s very modern! Even Europe is adapting to this methodology

Carlos: It’s in place in Spain  

Glenn: Yes you’ll see countries in Europe that are now also requiring electronic invoices for each transaction that’s being made locally. It’s interesting to see.

Carlos: By the end of the month the governments already know how many sales you’ve made or how much you’ve bought. For example, in Chile, there’s no need anymore for presenting sales orders or purchase ledgers.

Baz: When a company has electronic invoicing, they need to issue a certain amount of invoices, right?

Carlos: We have solutions for everyone. If a customer issues five electronic invoices, what do we offer them?

Glenn: There are different options. We can have an automated integration from within NetSuite, or we can use a middle man or local company to connect us to the tax authority. That means that once you create an invoice from within NetSuite, there’s a simple button to press and you’ll have an integration with the tax authority to generate an XML file and have that XML file validated. That’s the most beautiful and optimized solution we have. However, if a client has a very low volume of transactions every month it’s always possible to do double accounting, like issuing you invoices from within NetSuite but obtaining the legal XML file, not through a direct integration, but working with a local certified provider that’s connected to the tax authority. Those are two different options. As soon as the company starts issuing fifty or a hundred invoices a month it’s very important to have that automized from within NetSuite. Otherwise, that would be a huge amount of manual work to do that separately from outside of the system.

Carlos: For customers issuing 20 or 40 thousand invoices a month, we also have a solution.

Glenn: Of course and we use different technologies to support that kind of volume.

Carlos: SFTP

Baz: Automation is very important for people to have a more efficient process! I’ll try these nachos I’ve been staring at them. This was prepared locally let’s give it a try!

(break)

Baz: We’re back for shot number two!

Carlos: To legal ledgers! Cheers!

Glenn: To legal ledgers! Cheers!

Baz: Salud! What’s the challenge with legal ledgers?

Carlos: First of all legal edgers are not just reports. The first thing that comes to people’s mind is that legal ledgers are reports and that’s not the case. You’ll find different formats required throughout Latin America. For example, in Mexico, we have electronic accounting that is XML or (…) 14:45 in Argentina or in Chile it’s a different case. In Paraguay, you have to print your legal ledgers. Every single government requires different types of legal ledgers.

Glenn: This happens every single month, in some countries bi-monthly.

Carlos: In Peru, you have to issue legal ledgers annually and monthly. In Argentina, it’s biweekly

Glenn: It’s difficult to be in control and comply with all of that. Imagine being an international company expanding to Argentina, how do you know you’re doing the right thing? This week I had a call with a client who’s expanding to Brazil and we were offering our product to them to manage everything from within NetSuite. He was asking how to know if he’s applying the correct tax rates because there are many options for the item that he’s selling.   

 

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Carlos: exactly. Going deeper into legal reporting, you will find that every single report is a very specific format. It’s not like in the States where the IRS asks you for your sales, and you will send them a report an XML file. While in Mexico it has to be in a very specific format required by the government. In Brazil, it’s going to be more difficult because the government will ask you for specific information depending on your industry. For example, our friends from IG Networks required something different because they are in the telecommunications industry.

Baz: That’s very interesting and detailed, it’s not like anyone would know this information! Unless you’re working with somebody who has that information.

Glenn: Generally what a company would do is contact a local accounting firm and a local software provider. Local software meets local needs, everybody’s happy. The problem is that there’s no visibility or control.  

Carlos: If a company is operating with NetSuite in Miami and they have a subsidiary in Brazil. If they operate with local software, the local accountant is in control of that local software and mistakes could be made. Our solution provides control our customers to get one single to have one single perspective.

Baz: What about withholding taxes?

Carlos: What is a withholding tax, Glenn?

Glenn: A withholding tax is really paying taxes in advance. That’s typical in Latin America. If we talk about withholding taxes in the US, people would think that withholding taxes are placed on the income that you earn from a company. That’s not the kind of withholding tax we are talking about here. In Latin America withholding taxes paid up front on a certain transaction to the government.

Carlos: If I receive a bill from Glenn, I don’t pay Glenn 100% of the bill. I only pay him a certain amount and the rest will go to the government. You will find different rules for every single country.

Glenn: In Brazil, it will depend on where are you doing business and the person that you’re doing business with. It depends on the city you’re located or whether you’re selling services or goods, or whether it is a subscription-based product. All of these things will define what kind of withholding tax rates are going to be paid.

Baz: That can become very complicated!

Glenn: Because there are hundreds of combinations!

Carlos: We offer our customers a direct connection to a local player so they can get the correct rates from that local supplier. That way we can calculate the withholding tax amounts inside of NetSuite.

Glenn: Our product provides legal information required on item and customer level. Having that information sent to the third party provider, having that legal information they can quickly make the right tax calculation because they have access to those rates in real time, and we get information back. It’s a very smart and quick solution!

Carlos: Let’s imagine we’re issuing an invoice in Brazil. The connections built inside of NetSuite by LatamReady will be two: the sales rates connection and the withholding tax rates connection. You’ll have two different suppliers but you’ll never notice because everything is working in NetSuite and in the same user interface. Once you click on the save button you’ll have the invoice. A connection developed by us connecting NetSuite to the electronic invoicing supplier.

Glenn: If you’re doing business in Brazil your company and billing system will have to be connected to a local e-invoicing provider in some way. The challenge here is how to do that with NetSuite. It always becomes more complicated once the client wants to upgrade to something like NetSuite, a global ERP. That’s where our experience is of a lot of value.  

Baz: We’re basically the solution for NetSuite in Brazil.

Glenn: We’re the solution for NetSuite in the whole region of Latin America!

Baz: That’s right! And lastly, to finish up I have one more question. What makes Mexico and Latin America so unique and how are we the best players?

Carlos: Mexico is unique because it was one of the first countries to adopt electronic invoicing, together with Chile both at about the same time. Electronic invoicing is very developed in Mexico where you’ll find many requirements. Mexico also has its own tax rules. We developed Mexico’s traslado de retenciones many years ago. Those are accounting rules required by the government and they are very different from what you usually expect from an ERP. The way Translado de (…) 23:47 works is the following. When you sell in Mexico, the government will ask you to use one account if you sell in cash, and a different account if you sell in credit. We take control of this using NetSuite standard technical features, like (…) 24:12. That way our customer won’t have any problems.

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Baz: Customers asked for something and we developed that for them. In Peru, we currently have the biggest software factory for tax compliance in Latin America. We have 35 people working exclusively on developing our tax compliance solutions. Every time we find something that’s new, we can develop it very quickly with our new developers.

Glenn: That’s important because one of the things that make Mexico unique is the dynamic characteristic of the region, I say region because it counts for Latin America as a whole. There’s a reason why we have a team of 35 developers because there are constant changes in legal requirements. We have to act quickly because we work with billion dollar companies. The biggest NetSuite customers out there work with us to make sure that they can use NetSuite to its full potential in Latin America. They count on us to make sure that they are 100% compliant with legal requirements at all times. The engine keeps running. New requirements are being made and LatamReady is adapting. That’s part of what makes Mexico and Latin America unique.

Carlos: Just for you to know, our new version which will be released in March will include new features for Latin America. Most of them for Brazil

Baz: 2019.1?

Carlos: Exactly.

Baz: We’re looking forward to the next legal updates from LatamReady and from NetSuite as well. Version 2019.1 which will happen soon, we’ll have a webinar about that soon!

Carlos: LatamReady will focus this year on Brazil. It’s one of our biggest opportunities and the last country we’ve developed. All the effort and all the energy is going to Brazil now.

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Baz: Are you ready for that Glenn?

Glenn: Absolutely!

Baz: Alright! Thank you, gentlemen, for today!

Carlos: Another shot?

Glenn: I’d like a glass of water too, please!

(laughs)

Baz: We’ll have another shot when we cut the camera. Let’s have agua de jamaica instead! Goodbye, everybody, we’ll see you next time!  

Glenn: Bye!

Carlos: Bye!

 

 

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