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Although Peru’s e-invoicing requirements don’t go into full effect until the middle of next year, libros reporting extensions are due at the beginning of 2016. Companies MUST prepare now to meet these reporting requirements or risk fines and penalties. And unlike libros requirements throughout much of Latin America – Peru’s are significantly complex, more similar to the depth of information requested in Mexico’s eContabilidad model.

Here are the top four questions we’re asked as companies prepare for this new mandate.

Who is affected?

Any business operating in Peru with income equal to or greater than 150 UIT ($180,000 USD) is subject to the programa libros electronicos (PLE) requirement to file electronic reports for all sales and purchases. Those with over 3,000 UIT ($3,696,000 USD) in income must submit more than 10 accounting reports electronically beginning in January 2016.

What is required?
The standard reports required include Compras (purchases), Ventas (sales), Libro Diario (daily ledger) and Libro Major (general ledger), as well as additional reports for principal contributors.

What are the risks?
Penalties include:

  • .2% of net income for any language other than Spanish and currency other than Peru’s used in the reports
  • .3 to .6% of net income for inaccuracies in the reports
  • Up to 30% tax penalty for missing or invalid records

 

Plus, inaccurate, delayed and missing reports trigger audits, potentially resulting in even greater fines and penalties.

How do we prepare?
The most important consideration as you prepare for compliance with the libros reporting mandate is to remember the big picture. Although this mandate is separate from Peru’s e-invoicing requirements, an error in one place will trigger errors in other reports. Managing compliance through one integrated system within your ERP minimizes compliance risks and automates these reporting requirements.

Increasing globalization has significantly changed the corporate tax function, with constantly shifting regulations and stakeholder demands. In a recent report, “Reshaping the Tax Function of the Future,” PricewaterhouseCoopers (PwC) details several critical factors that will drastically impact the way companies do business worldwide – trends we’ve especially seen in the complex Latin American compliance landscape.

The big picture? Combined, improved visibility into all financial transactions and increased automation are helping companies pave the way to the Holy Grail of cost savings and risk mitigation. As we’ve discussed previously, the business-to-government mandates in Latin America are helping to speed up this automation and visibility.

Other highlights from the report include:

Government mandates are here to stay.

“Global tax information reporting requirements (e.g., CbCR and similar transparency initiatives) will grow exponentially and will have a material impact on the operations and related budget Download the PwC reportallocations within the tax function.

Country-by-country (CbCR) reporting is not the first transparency initiative, and it won’t be the last. But what makes the CbCR requirements stand out is the breadth of their reach and impact on taxpayers, tax authorities, governments and even the general public.”

As governments worldwide seek to maximize tax revenues, we can expect to see an increasing number of business-to-government mandates. With the success of e-invoicing in Latin America (for example, Mexico increased tax collections 34 percent in just its first wave of e-invoicing), other countries across the globe, including Russia, Singapore, Italy and Spain, are beginning to explore this model.

Risk management and governance are straining financial reporting now more than ever.

“Increased global compliance requirements combined with inefficient processes and over-reliance on spreadsheets will increase risk and drain already strained resources.”

Government mandates change at a rapid pace, and updating internal systems and processes to comply with these changes can be a complex and cumbersome process. As transparencies and information sharing increase, governments will also have the capability to sift through data and easily conduct global audits. The risk of error is high – with severe fines and penalties leveraged for tax discrepancies and errors.

As this pace of change only continues to increase, tax departments must find ways to streamline their operations and automate reporting processes to avoid costly mistakes.

Technology is changing how we manage financial reporting.

“The linchpin for real transformation is data. How data issues are solved will shape process change, which in turn will drive the resource model and the opportunities for value-added activities that contribute more strategically to the business.”

Proactive companies are realizing the efficiencies of better managing their data. From streamlined AP and AR processes to error avoidance, automation is helping companies to focus on innovation instead of manual financial processes.

Staying Ahead

As PwC explains, a corporate tax strategy and roadmap are critical for transforming the tax function. As business-to-government regulations become the new normal, planning now for future compliance measures is critical. Learn more about how Invoiceware is staying ahead of the curve, helping companies turn business-to-government legislation into opportunities.  

 

In the past several years, we’ve seen an increasing trend of multinational corporations moving to a single global instance of SAP to maintain better visibility into operations around the globe and improve corporate governance. At the same time, governments throughout Latin America have implemented regimented e-invoicing and e-accounting requirements. The goals of each of these efforts are the same – increased visibility into financial operations. However, the two trends significantly counteract each other, making global implementation of SAP a distinct challenge in countries enforcing business-to-government compliance.

 

E-invoicing and e-accounting reporting requirements vary in mandated countries worldwide – affecting separate transactions and business operational units, detailing certain naming architectures and fields, having select character limits, etc. To adequately maintain compliance, SAP must be adapted to account for all of these irregularities. However, implementation of SAP in mandated countries is only a fraction of the compliance battle. Because regulations change swiftly, keeping transaction and reporting structures up-to-date with the latest requirements is an ongoing task.

 

For example, just this week, Mexico’s new Polizas reporting requirement goes into effect – requiring journal entry reports dating back to July 1, 2015. For effective compliance, it’s critical that a company’s ERP be the system of record for these – and all other – mandated reports. Leveraging a third-party solution or maintaining records outside of SAP leaves companies vulnerable to costly irregularities – the exact kind of discrepancies that trigger audits in Mexico and other countries with similar requirements.

When rolling out SAP in Mexico, it’s critical that the local template, e-invoicing transactions and mandatory government reporting are integrated. Any holes in the process leave companies at risk for significant fines and audits by the SAT (Mexican tax authority, equivalent to the IRS in the United States). Looking at the Polizas mandate specifically, a penalty of up to $3,368 MXN (approximately $200 USD) will be enforced for each transaction that should have been posted in the delinquent or inaccurate Polizas. That can add up quickly when you consider the dozens of transactions that may be tied to a single journal entry. Further, unreported income or taxable income adjustments uncovered through SAT audits carry even heftier penalties. In some cases, the interest, penalties and fines may very easily total 80% to 100% of the imposed tax deficiency.

The audit and penalty risks associated with compliance errors make it critical to implement SAP effectively in Mexico and other countries with business-to-government mandates. Despite the challenges and ongoing maintenance needed, managing compliance through your corporate ERP is the only way to minimize audit risk and ensure reporting accuracy.

For more information on implementing SAP in Mexico, be sure to join our webinar on September 10, where Invoiceware and our partner LinkTech discuss common configuration challenges and upcoming legislation requirements.

 

 

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