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Pwc Indirect Tax Guide Americas 2015

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Pwc Indirect Tax Guide Americas 2015 + Foreword Another year has passed, and so quickly. This year had rapid changes in the area of indirect taxation in many countries around the world. Changes that were not so easy to follow and implement and tax legislations that were modified during the year as well. In contrast to direct taxes, such as corporate tax, businesses cannot adapt retrospectively to changes in indirect tax legislation. Businesses need to adapt their IT systems, prices and even their business and process flows immediately, preferably before the changes take effect. Not knowing the rules, or not tracking and implementing them properly in real time can result in non-compliance. This can be costly if consumption taxes cannot be recharged to customers later. In addition to the tax shortfall arising on your supplies, non- compliance can trigger significant penalties both for the sales side and for those cases when input taxes are improperly reclaimed. Based on ever increasing indirect tax rates and the complexity of legislation, proper management of indirect taxes is critical to the financial wellbeing of companies. The amounts at stake, resulting from an indirect tax assessment from the authorities, can be high, even in cases of simple disagreements about the interpretation of basic legislation. Executives of non-compliant companies could become subject to potential prosecution for tax fraud even if the incorrect indirect tax treatment did not bring any financial gain for their company. Irrespective of how consumption taxes are assessed, be they imposed as a Value Added Tax (VAT), Goods and Sales Tax (GST) or Sales and Use Tax (SUT), their prevalence is continuously growing in the Americas as well. Therefore it gives me great pleasure to introduce the 2015 update of the “Guide to VAT/GST/SUT in the Americas”. Please use this publication as a guide to the complex indirect tax systems of the Americas. If you need support in interpreting the rules, please feel free to contact one of PwC’s local experts to help you solve your practical problems. PwC’s Indirect Tax Network is a family of experts, with more than two thousand indirect tax specialists present in over 130 countries. Our global network aims to make the indirect tax function of your company more efficient and help you to consistently take the right decisions. We are pleased to offer you our expertise and contribute to the success of your business. Michaela Merz Global Indirect Taxes Network Leader PwC Switzerland 2 © Preface Here it is. Our 6th edition of the renewed 2015 VAT/GSTSUT Guide of the Americas. This new edition comes with an important world economic context. All governments are looking for increased revenues from taxes. At the same time, governments are envisioning, along with world organizations, private companies and the society at large, for better ways to bring transparency and effectiveness in the payment and collection of taxes. The Value Added Tax, and in general the indirect taxes in the world have been a great platform to put this vision in place. Legislations in many countries are changing to more robust indirect taxes, with more standard rules and less exceptions. From a technology world standpoint, the changes have empowered both the governments and the tax payers to create technology based solutions, to lower the burden of the payment/collection of taxes and, at the same time to create better management systems to administrate all the processes accordingly. The electronic invoicing is only one example of this revolution all over the world. Big Data is arguably the next big challenge to overcome. In the Americas –from Alaska to La Patagonia– the above statements are becoming a reality. Mexico has implemented electronic invoicing as well as electronic accounting in its legislation Mexico has also changed significant Value Added Tax rules, looking to reduce the exceptions, and to make clear that the revenue from VAT must be equal to all tax payers subject to the tax and all over the Mexican territory. Ecuador made the electronic invoicing as mandatory since January 2015 for most taxpayers, such obligation applies solely for transactions that support tax credit for VAT purposes. Argentina also referred the electronic invoicing as mandatory, but in this country began to be implemented since July 2015 for all VAT registered responsible taxpayers. Only very small specific taxpayers would be exempted. 3© Brazil issued two important decrees applicable as from July 1st 2015 onward in regard with PIS and COFINS; one of them establishes an increase in tax rates on financial revenues, and the other one establishes an exception for foreign exchange revenues arisen from exports of goods and payables. Peru specified the provisions of the joint liability for non-established taxable persons establishing that the purchaser of goods is joint liable of the VAT, when the seller has no domicile in the country. Our new 2015 version of course is being published in an electronic format, so you, our reader, can have the Guide handy in your iPhones, smartphones and tablets. In the same fashion as in the past 5 years, we have updated our PwC of the Americas directory, so you can have direct access to our wide array of local contacts all over the American Continent, specialized in Indirect Taxes. We hope to satisfy your needs of local updated information in a global format with this PwC 2015 VAT/GST/SUT Guide of the Americas. Truly Mauricio Hurtado Ivan Jaso Tax & Legal Services Indirect Taxes Network Managing Partner Wester Cluster Leader PwC Mexico PwC Mexico 4© Introduction Generally speaking, VAT in the region operates in a similar way to the Challenges in the years to come European Union’s VAT regime. It is a turnover tax levied on the supply of goods and services when performed in a business environment, as well as on With the economic competitiveness and the increasing reliance on VAT the importation of goods and services. VAT incurred on purchases or levied as the preferred option for taxation, American countries should design on importation can in principle be offset against the VAT due on sales. This effective and efficient tax regimens to create a ‘win-win’ model for credit/debit system has features within each country arising from specific Governments, Businesses and Taxpayers. needs and circumstances. A model where on one side, the Tax authorities maintain their Most of the American countries have adopted a standard VAT system, with a revenues and increase the business attraction and employment; and on single VAT law that is applicable across the country even where a country is the other side, businesses keep a sustainable global profit and low risk a federal state. However, there are some exceptions such as Brazil, Bolivia to comply their and Costa Rica. tax burden. Both sides must count on the help of technology to reduce cost of collection. And last but not least, the Consumers, who are looking for employments and willing to contribute on an easy and fair Understanding VAT in America tax regimen. VAT is often seen by Multinational Companies as a cash flow issue which could in some cases represent a significant cost. In America, this could be Another huge challenge will be to forecast whether or not the United the case of VAT incurred by foreign residents, as any of the countries States may implement the VAT, especially in these complex times, included in this publication provides a refund mechanism for such where new ideas, revenue and recession solutions must be in the purposes; or input VAT related to preoperative expenses which in some agenda. cases is not recoverable until the entity performs taxable activities; or even This Guide to VAT in the Americas may be a simple first approach to the administrative burden for the companies to fulfill the requirements understand how each country uses the system, leverages the revenue established in the law and complementary legislations. and deals with domestic and international businesses. For the Tax Authorities, VAT is becoming an increasing focus area because We hope that you will find if not all, many of the answers to your of the simple and efficient tax collection and, as mentioned before, questions about VAT in this complex and no less fascinating part of the important source of revenue for different governments. Therefore, Tax world. Authorities are increasing and improving their audit procedures in order to reduce the risk of fraud and evasion. 5 PwC Note on terminology In the main, we have adhered to generally accepted VAT English terminology. However, it should be considered that VAT/GST/SUT systems across the region and the respective terminology are not harmonized. Moreover, in most cases local legislation is not issued in English language. The following terms pose particular difficulties: Supply of goods and services: A supply of goods is generally understood as any transfer of the right to dispose of tangible or intangible property and a supply of services, as any transaction which does not constitute a supply of goods. VAT legislation in the region rarely provides a definition of goods or services; therefore this is subject to local interpretation. Where such definition is provided, it has been included in the corresponding country chapter. Importation: Importation is generally understood as the introduction of tangible goods into a country. However, some countries provide a broader definition. Please refer to specific country chapters. VAT withholding agent: In many countries in Latin America, there are specific transactions where the liability for payment of VAT is shifted (partially or totally) from the supplier to the recipient of the goods or services. In these cases, instead of paying the corresponding VAT to the supplier, the recipient withholds the VAT and pays it to the Tax Authorities.
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