Electronic Invoice

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Fifth Meeting of the FTA Taxpayer Services Sub-Group
11-13 October 2006
Istanbul - Turkey
Pre-filled Tax Return Systems & Third Party Reporting
Systems
Electronic Invoice
(VAT)
Fernando Barraza
Aurea Hervias
Servicio de Impuestos Internos (SII) - CHILE
(Chilean Internal Revenue Service)
CHILE – Demographic Features
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

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From north to south: 4,500 km
Size: 750,000 sq km
Coastline: 6,435 km
Land boundaries: 6,171 km
Border countries: Argentina 5,150 km,
Bolivia 861 km, Peru 160 km
Two levels of government: National and
Municipal
12 Regions plus a Metropolitan Region
(MR)
Population: 15 million
35% of population in MR
CHILE – Taxation Regimes
 National (tax revenue=19% of GDP,
about US$ 19 billion)
• VAT (50% of TR, 19% VAT rate)
• PIT and business profit tax (25% of TR,
17% rate for BPT, which is integrated
with PIT)
• Excise tax (gasoline, oil, tobacco,
cigarettes, liquors, wine, and beer)
• Stamp taxes (tax on loans)
• Customs duties (very small)
 Municipal (1-2% of GDP)
• Property tax (administered by the SII)
• Commercial and vehicle licenses
CHILE – Chilean IRS (SII)
• Chilean IRS (Servicio de
Impuestos Internos, SII)
 3,700 staff
 Headquarters (9 departments,
function-based organization)
 16 Regional offices (4 at the MR)
 1 LTO (Large Taxpayer Office)
 60 local offices
 Virtual Office at Internet: www.sii.cl
Nature of Chilean Tax System and
Features of Tax Compliance
Tax system in Chile is based on two main principles:
i.
Taxes emerges from economic activity development
 Businesses development
 Professional activities
 entrepreneurship
Imply tax
compliance
liabilities
ii. Compliance is based on self-assessment
 Assume taxation knowledge
 Sanction for not compliance
Cost of
compliance, and
for not compliance
Internal Revenue Service’s Mission

To administrate the Internal Tax Legislation

To audit and facilitate Tax compliance of
taxpayers

To reduce the transaction costs and contribute
to increase the productivity of the agents of
our economy
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To encourage the modernization of the state
administration and the e-government
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All above, to contribute to the Chilean
economic development
Proposal of Annual Income Tax Return
 The general objectives of this Project were:
• Facilitate and simplify by self-services, the complex process of the
annual income tax declaration, improving tax compliance
• Reduce the number of declarations disputed, reducing the
number of taxpayers who have to be audited
• Help to reduce tax evasion
• Achieve 100% of tax declarations by Internet
 The specific objectives were:
• Offer Proposal Pre-filled of Annual Income Tax Return to
taxpayers with complete information
• Offer partially Proposal of Annual Income Tax Return to taxpayers
with partial information, which they must complete
• Minimize tax compliance costs, using all information about
taxpayers that the chilean internal revenue service receive into
sworn declarations from the third taxpayers, such as companies,
employers, banks, clients and providers
On line Tax Returns
This graph shows the comparative evolution among the two kinds of
declarations. In 2006, 97,04% of the tax declarations were submitted
through Internet (2,070,643) and 2,96% in paper form (63,289)
Online vs Written - Tax return
2,500,000
1,984,383
1,663,720
2,000,000
Declaring
2,068,637
1,403,193
1,500,000
1,132,933
1,000,000
500,000
341,388
926,278
638,720
76,289
63,289
0
2002
2003
2004
Year
Online forms
Written
2005
2006
Proposal Pre-filled
current steps
 Extend
this feature to other declarations
such as the Monthly Tax Declaration and
Payment (VAT tax returns)
 We
are working on replicating the model
based on information submitted by the
companies, clients and suppliers
 One
way to get it, was the Electronic
Invoices (e-Invoice)
Electronic Invoices
What is it?
ELECTRONIC TRIBUTARY DOCUMENT EXCHANGED BETWEEN COMPANIES
(to collect VAT through the companies that sell/buy products or services)
The electronic document “e-Invoice” has the same legal value
than traditional on paper Invoice
It is generated by an electronic process in the format and
procedure defined by the Chilean Internal Revenue Service
Digital signature is necessary to guarantee integrity,
authenticity and no repudiation of e-Invoices
Strategic alliance with ICT companies to promote the
electronic invoice adoption
Electronic Invoices
Others electronic documents
related are:
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Credit Notes
Debit Notes
Delivery Guide
Service Invoices
Export/Import Invoices
Electronic Invoices
Reduces process costs
Increases productivity and competitiveness
Enable pre-filled VAT tax returns without third party
reporting (data are captured in the commercial
transaction source)
Standard messages (XML)
 Typing elimination (pre-filled suppliers & clients data)
 Standard printing (PDF417 print code)
 Fast queries of documents
 It is possible of adding publicity
 Improves relationship between suppliers and clients

Electronic Invoices
Solutions

Tax Administration online software (free)
Available to Micro & Small Companies

“Off the shelf” Software
Medium companies

Customized Software
Medium & Big companies with ERP

“In house” software
Big companies
Electronic Invoices
Status
1.847 companies are emitting e-Invoices (large
companies push to small companies)
 29% (749) is Micro & Small Companies
 589 Government Agencies are receiving eInvoices (biggest catalyst)
 565 companies waiting for authorization to
begin operation
 105.501.975 million e-Invoices emitted
 20% of total invoices is electronic
 Brasil began the adoption of the same model

Electronic Invoices
Recepción de DTE en el SII
6.084
6.200
5.812
5.550 5.555
5.512
5.332
4.777
4.714
4.666
4.455
5.200
2000
5.980
1800
1807
1600
1520
1127
3.510
1200
1227
3.077
3.200
1000
2.761
740
669
400
383
Período (Año/Mes)
200
06
/0
9
06
/0
7
06
/0
5
0
06
/0
3
05
/0
9
05
/0
7
05
/0
5
05
/0
3
05
/0
1
04
/1
1
04
/0
9
04
/0
7
04
/0
5
04
/0
3
600
939
459
301
262
237
201206
139153155163
106
80 80 86 93
55 65
23 23 24 24 32 35 40 40
04
/0
1
831
1022
538
1.367
1.238
1.096
892
06
/0
1
929
906
873
824
825771
899
731
611
03
/1
1
200
1.961
1.884 1.861
1.660
1.587
05
/1
1
2.200
1.200
800
2.371
2.157 2.224
1.949
Emisores Autorizados
1379
3.949
03
/0
9
Documentos Recibidos (Miles)
1400
4.200
Electronic Invoices
Micro & Small Companies
Facturación Electrónica MiPyME
2981
3000
2800
749
720
2600
2481
2400
620
557
2000
1830
520
1800
1600
1491
1400
1559
449
420
384
1136
1200
1000
865
800
660
333
320
945
277
845
242
712
220
204
600
174
374
400
133
120
99
200
0
70
85
29
SEP-05
20
OCT-05
NOV-05
DIC-05
ENE-06
FEB-06
MAR-06
Períodos
ABR-06
MAY-06
JUN-06
JUL-06
'Ago-06
'Sep-06
Contribuyentes Autorizados
Documentos Emitidos
2200
Internal Revenue Service’s
Summary
The main channel to communicate with taxpayers
is by Internet (Website: www.sii.cl)

100% third party information, annually

97% income tax returns, annually

54% VAT tax returns, monthly

87% of total income taxes ($), annually

83% begins activities or commencement of business
on line, monthly
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70% electronic personal services invoices, montly

20% electronic companies invoices, monthly
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All taxpayers access to SII’s Website authenticated
with password or digital signature
Lessons we can learn
Electronic tax compliance services have to aim to…
 Provide high quality taxpayers services to simplify, facilitate and
improve tax compliance (increase taxpayers awareness)
 Minimize tax compliance costs (taxpayers visits to SII offices,
banking, and any other organizations that require tax information)
 Optimize and strengthen SII enforcement capability to use and
manage good taxpayers information
 Encourage use of ICT, and improvements at taxpayers’ business
cycles as a result of its adoption
 Produce demonstration effects to other public agencies about ICT
adoption, and also to private sector
Final comments
• We have noticed taxpayers increasingly prefer SII´s
electronic solutions for tax compliance:
 www.sii.cl is clearly recognized and highly appreciated by taxpayers
 www.sii.cl the fourth most visited Web site in Chile
 www.sii.cl has been given several awards (nationally and internationally)
• Our electronic tax compliance approach has helped us to
achieve several objectives:
 Increase efficiency and effectiveness of tax compliance, for taxpayers
and tax administration
 Incentivize productive and competitive improvements
 Increase transparency and awareness of tax compliance through
citizens’ direct participation
 Enable pre-filled all tax returns (future)
Thank you and visit…
The SII’s Virtual Office at Internet
Fernando Barraza
[email protected]
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