Electronic Invoice VAT

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Electronic Invoice(VAT)
Fifth Meeting of the FTA Taxpayer Services
Sub-Group 11-13 October 2006 Istanbul - Turkey
Pre-filled Tax Return Systems Third Party
Reporting Systems
Fernando Barraza Aurea Hervias Servicio de
Impuestos Internos (SII) - CHILE (Chilean
Internal Revenue Service)
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CHILE Demographic Features

• 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

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CHILE Taxation Regimes

• National (tax revenue19 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

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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

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Nature of Chilean Tax System and Features of Tax
Compliance
Tax system in Chile is based on two main
principles

• Taxes emerges from economic activity development

Imply tax compliance liabilities

• Businesses development
• Professional activities
• entrepreneurship

• Compliance is based on self-assessment

Cost of compliance, and for not compliance

• Assume taxation knowledge
• Sanction for not compliance

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Internal Revenue Services 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
• To encourage the modernization of the state
  administration and the e-government
• All above, to contribute to the Chilean economic
  development

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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

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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)
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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)

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What is it?
Electronic Invoices
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
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Electronic Invoices

• Others electronic documents related are
• Credit Notes
• Debit Notes
• Delivery Guide
• Service Invoices
• Export/Import Invoices

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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

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Electronic InvoicesSolutions

• 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

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Electronic InvoicesStatus

• 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

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Electronic Invoices
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Electronic InvoicesMicro Small Companies
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Internal Revenue Services 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
• 70 electronic personal services invoices, montly
• 20 electronic companies invoices, monthly
• All taxpayers access to SIIs Website
  authenticated with password or digital signature

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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

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Final comments

• We have noticed taxpayers increasingly prefer
  SIIs 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)

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Thank you and visit
The SIIs Virtual Office at Internet
Fernando Barraza fbarraza_at_sii.cl
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