As you may know, Brazil recently held its presidential election, with Dilma Rousseff winning another term in office after edging out a victory over challenger Aecio Neves. With 99 percent of precincts reporting, Rousseff got a plurality of the vote at 51.5 percent to her challenger's 48.4 percent.
At her campaign headquarters following the win, Rousseff pledged to take "urgent action" to re-establish Brazil as an economic leader in the world.
With the new year just around the corner, much of Brazil's economy will be determined by how businesses perform. Outcomes are largely based on consumers, but in order to advance on the market, companies need to be aware of the many regulations that go into effect starting next year.
Many of these new rules pertain to the invoicing requirement that several Latin American countries have already established or soon will do so. Take for example the NFe version 3.10. Starting in March, the current 2.0 version will be shut down, meaning all companies will have to run the new one.
The NFe has to be used for both goods and services. For goods, NFes are managed at the state and federal level, while for services, they're handled by municipalities.
There's also the issue of validating inbound NFe goods. NFes that are received from suppliers have to be authenticated and then stored for five years. The consequences of failing to comply can be significant, costing as much as 500 Reais for every XML that's missing, not to mention the fines that come as well.
Another reporting requirement that will go into effect next year is the ECF SPED. These reports are to include details on tax deductions for certain expenses. They have to be turned in to the government no later than July.
Then there's the eSocial rule. Just about every major company has a human resources department, which typically handles employee issues as they arise. These have to be accounted for, however, as evidenced by the new eSocial rule. This HR mandate requires upwards of 40 transactions per employee, including topics like payroll. The latest announcment by the SEFAZ states that a company will have 6 months to comply once the final process is released by the government.
What's the reason for these new regulations?
A question that a lot of business owners have, particularly those that may be new to Latin America, is why the government has created these regulations in the first place. Many people associate regulations with adversely affecting the free market. So what good will they do?
"[The purpose] is to avoid tax evasion and reduce the movement of black market goods from the road," said Scott Lewin, President & CEO of Invoiceware International, a company that specializes in both e-invoicing and compliance. "This is why the pre-approved invoice is required prior to shipping."
Lewin also noted that, contrary to what some may believe, the regulations aren't confined to only certain industries. For example, the NFe and SPED legislation impacts all companies that operate in Brazil. There are some exceptions, though.
"New legislation, such as the Destinatario, often get implemented in waves of industries," said Lewin. "Destinatario was pushed through the the oil and retail gas station industries first and is now being mandated state by state in Brazil – with the two southernmost states - Rio Grande del Sul and Santa Catarina - demanding Destinatario messages for invoices over 100,000 Reais."
Business owners do not have the option of not complying with these regulations, as the financial penalty can be stiff. In fact, even making mistakes can result in a substantial fine. For example, a company was recently hit with a $300,000 fine because the PDF was different than the government's XML for three invoices.
The business could have avoided this pitfall with compliance assistance.