Brazil was one of the forerunners in e-invoicing in Latin America – indeed also globally – as they adopted a total clearance model for e-invoicing way back in 2005. In Brazil, suppliers must submit electronic invoices to an “ok-to-issue” clearance platform belonging to the tax authorities before issuing an invoice to a client. However, even though Brazil’s clearance systems for e-invoices are relatively mature and stable, both their tax rules and e-invoicing clearance process are still widely considered the most complex in the world of Continuous Transaction Controls (CTC).
How is E-Invoicing Complex in Brazil?
1) There are different types of electronic invoices, and requirements on content and digital signatures vary by region
There are different types of electronic invoices required, depending on whether they are for goods, services, transport, freight services or electricity:
- goods (NF-e)
- services (NFS-e)
- transport services (CT-e)
- freight (MDF-e), SPED, REINF
- electricity supply (NF3e)
There are not only specific XML formats required for certain sectors, all with their own stipulations on the information which they need to contain, there are also several parties involved before the e-invoice can be cleared.
Before an e-invoice can be authorized by the tax office responsible for the supplier’s regional area, the supplier needs to sign the invoice electronically. This requires a digital certificate, provided by government-accredited local Brazilian certification authorities.
This all means that the tax payer ends up sending a huge volume of data in order to adhere to tax rules.
2) Regulations are sometimes nationwide, sometimes at state-level, sometimes at municipality-level
Brazil is a federation consisting of 26 states and one federal district. These are covered by a total of thirteen different ʽState Tax Officesʼ (PT: “Secretaria da Fazenda Estadual – SEFAZ”). Each SEFAZ is responsible for providing e-invoicing Web Services (WS) to registered taxpayers in the state under their jurisdiction. Some SEFAZ share the same e-invoicing platform, while others have a dedicated platform. Those who have been following the recent implementation of B2G e-invoicing in Germany will recognize a few similarities in the complexity caused by regulations and portals being implemented at state level.
To give you an example of the diversity:
- As a rule, an NF-e is the e-invoice issued in transactions involving physical goods. These transactions are taxed at state level. The NF-e follows the same framework throughout the country, regardless of the municipality or state of origin/destination of the supply.
- An NFS-e is the e-invoice issued in transactions involving services. These transactions are taxed at the level of the roughly 5500 municipalities and cities in Brazil. However, the NFS-e requirements also vary by municipality. That makes it really challenging for electronic invoices for services to fulfil the legal requirements & tax regulations required by each regional tax office’s portal. Sending service invoices in an automated mode requires web service integration. Suppliers must also issue provisional invoices (Provisional Receipt of Service or RPS) (Pt.: Recibo Provisório de Serviço). Some municipalities require the RPS to be signed electronically (e.g. Sao Paulo). For some municipalities, digital certificates are used during the web service authentication (e.g. Rio de Janeiro), or even just for accessing the municipal portal.
- Once the RPS is authorized, it has to be converted into the NFS-e invoice. There is no time to waste, as legal timeframes vary from one municipal office to another, and not creating the NFS-e in time can result in being fined.
3) PDF versions of XML e-invoices are also required, and there are specific regulations for these.
Not only does the e-invoice follow a specific, legally stipulated XML structure, so do the PDF versions.
When goods are in transit, they need to be accompanied by a human-readable PDF version of the XML e-invoice. There are different, specific structures, e.g.
- DANFE for NF-e,
- DACTE for CT-e and
- DANF3E for NF3e.
4) E-invoices must be electronically archived.
- According to Brazilian tax law, invoices must be electronically archived for 5 years.
- These must be SEFAZ-authorized, signed XML documents.
- Furthermore, the related DANFE (etc.) pdf needs to be stored in case of issues with the invoice itself.
5) Once the invoice has finally been issued, the buyer needs to validate it.
Once the buyer has received the invoice, he needs to validate it before it is recognised as a document which can be written off tax. In addition to validating the invoice, buyers in certain industries are also required to issue a message known as Manifestação do Destinatário (En: Receiver’s Acknowledgement), in which the buyer states whether the invoice covers what has been provided. This is only shared with the tax authorities, not with the sending party.
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