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Fifth Meeting of the FTA Taxpayer Services Sub-Group 11-13 October 2006 Istanbul - Turkey. Electronic Invoice (VAT). 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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electronic invoice vat
Fifth Meeting of the FTA Taxpayer Services Sub-Group

11-13 October 2006

Istanbul - Turkey

ElectronicInvoice(VAT)

Pre-filled Tax Return Systems & Third Party Reporting Systems

Fernando Barraza

Aurea Hervias

Servicio de Impuestos Internos (SII) - CHILE

(Chilean Internal Revenue Service)

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

CHILE – Demographic Features
chile taxation regimes
National (tax revenue=19% 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

CHILE – Taxation Regimes
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

CHILE – Chilean IRS (SII)
slide5
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
internal revenue service s 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

Internal Revenue Service’s Mission
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

Proposal of Annual Income Tax Return
on line tax returns
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)

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)

Proposal Pre-filled current steps
what is it
Electronic InvoicesWhat is it?

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

electronic invoices
Electronic Invoices

Others electronic documents related are:

  • Credit Notes
  • Debit Notes
  • Delivery Guide
  • Service Invoices
  • Export/Import Invoices
electronic invoices15
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
electronic invoices solutions
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 InvoicesSolutions
slide17
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

105.501.975million e-Invoices emitted

20% of total invoices is electronic

Brasil began the adoption of the same model

Electronic InvoicesStatus

internal revenue service s 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 SII’s Website authenticated with password or digital signature

Internal Revenue Service’s Summary
lessons we can learn
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
final comments
We have noticed taxpayers increasingly prefer SII´s electronic solutions for tax compliance:Final comments
  • www.sii.clis 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)
slide23
Thank you and visit…

The SII’s Virtual Office at Internet

Fernando Barraza

[email protected]

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