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ElectronicElectronic InvoiceInvoice(VAT)(VAT)
ElectronicElectronic InvoiceInvoice(VAT)(VAT)
Fernando BarrazaAurea Hervias
Servicio de Impuestos Internos (SII) - CHILE(Chilean Internal Revenue Service)
Fifth Meeting of the FTA Taxpayer Services Sub-GroupFifth Meeting of the FTA Taxpayer Services Sub-Group11-13 October 200611-13 October 2006
Istanbul - TurkeyIstanbul - Turkey
Pre-filled Tax Return Systems & Third Party Reporting Systems
CHILE – Demographic CHILE – Demographic FeaturesFeatures
From north to south: 4,500 kmFrom north to south: 4,500 km Size: 750,000 sq kmSize: 750,000 sq km Coastline: 6,435 kmCoastline: 6,435 km Land boundaries: 6,171 kmLand boundaries: 6,171 km Border countriesBorder countries:: Argentina 5,150 Argentina 5,150
km, Bolivia 861 km, Peru 160 kmkm, Bolivia 861 km, Peru 160 km Two levels of government: Two levels of government:
National and MunicipalNational and Municipal 12 Regions plus a Metropolitan 12 Regions plus a Metropolitan
Region (MR)Region (MR) Population: 15 millionPopulation: 15 million 35% of population in MR35% of population in MR
National (tax revenue=19% of GDP,National (tax revenue=19% of GDP, about US$ 19 billion)about US$ 19 billion)
• VAT (50% of TR, 19% VAT rate)VAT (50% of TR, 19% VAT rate)• PIT and business profit tax (25% of PIT and business profit tax (25% of
TR, 17% rate for BPT, which is TR, 17% rate for BPT, which is integrated with PIT)integrated with PIT)
• Excise tax (gasoline, oil, tobacco, Excise tax (gasoline, oil, tobacco, cigarettes, liquors, wine, and beer)cigarettes, liquors, wine, and beer)
• Stamp taxes (tax on loans)Stamp taxes (tax on loans)• Customs duties (very small)Customs duties (very small)
Municipal (1-2% of GDP)Municipal (1-2% of GDP)• Property tax (administered by the Property tax (administered by the
SII)SII)• Commercial and vehicle licensesCommercial and vehicle licenses
CHILE – Taxation RegimesCHILE – Taxation Regimes
• Chilean IRS (Servicio deChilean IRS (Servicio de Impuestos Internos, SII)Impuestos Internos, SII)
3,700 staff3,700 staff Headquarters (9 departments, Headquarters (9 departments,
function-based organization)function-based organization) 16 Regional offices (4 at the MR)16 Regional offices (4 at the MR) 1 LTO (Large Taxpayer Office)1 LTO (Large Taxpayer Office) 60 local offices60 local offices Virtual Office at Internet: Virtual Office at Internet:
www.sii.cl
CHILE – Chilean IRS (SII)CHILE – Chilean IRS (SII)
i.i. Taxes emerges from economic activity developmentTaxes emerges from economic activity development
ii.ii. Compliance is based on self-assessmentCompliance is based on self-assessment
Tax system in Chile is based on two main principles:Tax system in Chile is based on two main principles:
Businesses developmentBusinesses development Professional activitiesProfessional activities entrepreneurshipentrepreneurship
Assume taxation knowledgeAssume taxation knowledge Sanction for not complianceSanction for not compliance
Imply tax Imply tax compliance compliance liabilitiesliabilities
Cost of Cost of compliance, and compliance, and for not for not compliancecompliance
Nature of Chilean Tax System and Nature of Chilean Tax System and Features of Tax ComplianceFeatures of Tax Compliance
Internal Revenue Service’s Internal Revenue Service’s MissionMission
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
To encourage the modernization of the state administration and the e-government
All above, to contribute to the Chilean economic development
Proposal of Annual Income Tax Proposal of Annual Income Tax ReturnReturn 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 ReturnsOn 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)
1,132,933
926,278
1,403,193
638,720
1,663,720
341,388
1,984,383
76,289
2,068,637
63,289
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
De
cla
rin
g
2002 2003 2004 2005 2006
Year
Online vs Written - Tax return
Online forms Written
Proposal Pre-filledProposal Pre-filled current steps 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)
What is it?
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 TRIBUTARY DOCUMENT EXCHANGED BETWEEN COMPANIES
(to collect VAT through the companies that sell/buy products or services)
Electronic InvoicesElectronic Invoices
Electronic InvoicesElectronic Invoices
Others electronic documents related are:
Credit Notes Debit Notes Delivery Guide Service Invoices Export/Import Invoices
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
Increases productivity and competitiveness
Reduces process costs
Electronic InvoicesElectronic Invoices
Enable pre-filled VAT tax returns without third party reporting (data are captured in the
commercial transaction source)
Tax Administration online software (free)Available to Micro & Small
Companies
“Off the shelf” SoftwareMedium companies
Customized SoftwareMedium & Big companies with
ERP
“In house” softwareBig companies
Electronic InvoicesElectronic InvoicesSolutionsSolutions
1.847 companies are emitting e-Invoices (large companies push to small companies)
29% (749) is Micro & Small Companies 589 Government Agencies are receiving e-
Invoices (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 InvoicesElectronic InvoicesStatusStatus
Recepción de DTE en el SII
611731
824906825771
1.0961.238
1.367
1.660
1.884 1.861
1.587
2.157
1.949
2.2242.371
2.761
3.077
3.510
3.949
4.455
4.666
5.512
6.084
5.9805.812
873892
899929
1.961
5.555
5.332
4.7144.777
5.550
23 23 24 32 35 40 4055 65 80 80
86 93 106139153155163
201206237262
301
383
459
538
669
740
1520
1807
1379
12271127
939
1022
24
831
200
1.200
2.200
3.200
4.200
5.200
6.200
Período (Año/Mes)
Do
cu
men
tos R
ecib
ido
s (
Mil
es)
0
200
400
600
800
1000
1200
1400
1600
1800
2000
Em
iso
res A
uto
rizad
os
Electronic InvoicesElectronic Invoices
Electronic InvoicesElectronic InvoicesMicro & Small CompaniesMicro & Small Companies
Facturación Electrónica MiPyME
85
374
660 712
865 845
1136
945
14911559
1830
2481
2981
29
7099
133
174204
242
277
333
384
449
557
749
0
200
400
600
800
1000
1200
1400
1600
1800
2000
2200
2400
2600
2800
3000
SEP-05 OCT-05 NOV-05 DIC-05 ENE-06 FEB-06 MAR-06 ABR-06 MAY-06 JUN-06 JUL-06 'Ago-06 'Sep-06
Períodos
Do
cum
ento
s E
mit
ido
s
20
120
220
320
420
520
620
720
Co
ntr
ibu
yen
tes
Au
tori
zad
os
Internal Revenue Service’s Internal Revenue Service’s SummarySummary
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 70% electronic personal services invoices, montly 20% electronic companies invoices, monthly All taxpayers access to SII’s Website
authenticated with password or digital signature
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
Produce demonstration effects to other public agencies about ICT adoption, and also to private sector
Encourage use of ICT, and improvements at taxpayers’ business cycles as a result of its adoption
Lessons we can learnLessons we can learn
• 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
Final commentsFinal comments
Enable pre-filled all tax returns (future)
Thank you and visit…Thank you and visit…
The SII’s Virtual Office at InternetThe SII’s Virtual Office at Internet
Fernando [email protected]