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Electronic Invoice (VAT) Fernando Barraza Aurea Hervias Servicio de Impuestos Internos (SII) - CHILE (Chilean Internal Revenue Service) Fifth Meeting of.

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Presentation on theme: "Electronic Invoice (VAT) Fernando Barraza Aurea Hervias Servicio de Impuestos Internos (SII) - CHILE (Chilean Internal Revenue Service) Fifth Meeting of."— Presentation transcript:

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

2 CHILE – Demographic Features From north to south: 4,500 km From north to south: 4,500 km Size: 750,000 sq km Size: 750,000 sq km Coastline: 6,435 km Coastline: 6,435 km Land boundaries: 6,171 km Land boundaries: 6,171 km Border countries: Argentina 5,150 km, Bolivia 861 km, Peru 160 km Border countries: Argentina 5,150 km, Bolivia 861 km, Peru 160 km Two levels of government: National and Municipal Two levels of government: National and Municipal 12 Regions plus a Metropolitan Region (MR) 12 Regions plus a Metropolitan Region (MR) Population: 15 million Population: 15 million 35% of population in MR 35% of population in MR

3 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 TR, 17% rate for BPT, which is integrated with PIT)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)Excise tax (gasoline, oil, tobacco, 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 SII)Property tax (administered by the SII) Commercial and vehicle licensesCommercial and vehicle licenses CHILE – Taxation Regimes

4 Chilean IRS (Servicio de Chilean IRS (Servicio de Impuestos Internos, SII) Impuestos Internos, SII) 3,700 staff 3,700 staff Headquarters (9 departments, function-based organization) Headquarters (9 departments, 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 offices 60 local offices Virtual Office at Internet: www.sii.cl Virtual Office at Internet: www.sii.clwww.sii.cl CHILE – Chilean IRS (SII)

5 i.Taxes emerges from economic activity development ii.Compliance 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 development Businesses development Professional activities Professional activities entrepreneurship entrepreneurship Assume taxation knowledge Assume taxation knowledge Sanction for not compliance Sanction for not compliance Imply tax compliance liabilities Cost of compliance, and for not compliance Nature of Chilean Tax System and Features of Tax Compliance

6 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

7 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

8 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)

9 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)

10 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 Invoices Electronic Invoices

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

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15 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 Invoices Enable pre-filled VAT tax returns without third party reporting (data are captured in the commercial transaction source)

16 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 Solutions

17 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 Invoices Status

18 Electronic Invoices

19 Electronic Invoices Micro & Small Companies

20 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

21 Electronic tax compliance services have to aim to… 3 3Provide high quality taxpayers services to simplify, facilitate and improve tax compliance (increase taxpayers awareness) 3 3Minimize tax compliance costs (taxpayers visits to SII offices, banking, and any other organizations that require tax information) 3 3Optimize and strengthen SII enforcement capability to use and manage good taxpayers information 3 3Produce demonstration effects to other public agencies about ICT adoption, and also to private sector 3 3Encourage use of ICT, and improvements at taxpayers business cycles as a result of its adoption Lessons we can learn

22 We have noticed taxpayers increasingly prefer SII´s electronic solutions for tax compliance: www.sii.cl is clearly recognized and highly appreciated by taxpayerswww.sii.cl www.sii.cl the fourth most visited Web site in Chilewww.sii.cl www.sii.cl has been given several awards (nationally and internationally)www.sii.cl 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 comments Enable pre-filled all tax returns (future)

23 Thank you and visit… The SIIs Virtual Office at Internet Fernando Barraza fbarraza@sii.cl

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