HEAD OF ACCOUNTING & OUTSOURCING SERVICES, MAZARS IN MEXICO
"Ethics will certainly be a differentiator in [Latin American] economies in years to come."
Chile is planning to tax on multinational ecommerce companies (that have localised operations). Do you see this as a growing trend in Mexico?
Not necessarily. Latin America is a vast region whose economies vary significantly in terms of regulatory sophistication. We probably will see a move towards tighter regulation of ecommerce businesses that operate in the financial services sector as these businesses gain market share from the traditional economy.
What tips would you put forward for ecommerce businesses targeting the Latin American market?
In the current context we advise ecommerce businesses to take the same precautions as all other companies entering the Latin American market. Setting up a company in a Latin American country and ensuring it is compliant with local regulations requires a certain amount of advanced planning, so it is important to research and understand local compliance regimes. We see many ecommerce companies getting in to high risk situations by trying to manage local tax compliance from their foreign
headquarters, without taking full local advice, which usually leads to serious delays in filing complete and accurate information.
The 2017 Global Corruption Barometer report states that whilst Brazil has a bribery rate of 11%, the Dominican Republican for example has an much higher rate: 46%. Are issues such as these a large barriers to cross-border ecommerce trade?
From our experience, foreign investors who register their businesses correctly with the relevant authorities and transact with bona fide clients and suppliers may actually rarely encounter bribery in the day-to-day management of their business. Concerns over corruption are ever present in the region but this does not seem to have an impact on the inflow of foreign investment, or local start up investment, in the ecommerce sector.
Would you say the Latin America tax system/regulations are easy or difficult for foreign companies to adapt to and incorporate?
Provided that the foreign company genuinely appreciates that the region comprises many different, often very sophisticated tax regimes, there should be no problem in adapting. When things go wrong, in our experience the problem can usually be traced to incomplete understanding at corporate level, or worse, the assumption that US or European ways of addressing accounting and tax compliance will somehow be acceptable in the different local economies.
What effect do current tax systems/schemes have on ecommerce in Latin America?
Revenue recognition will always be a key issue and care must be taken in countries where there are very strict rules on the issue date and consequent recognition date (in accounting and tax terms) of revenues, costs, VAT and income tax.
Several countries have compulsory e-invoicing systems, which are directly linked to the tax authorities’ systems, so internet-based companies with massive levels of customer interaction must ensure they have systems that
are capable of registering revenues on a transaction-by-transaction
basis with the tax authorities.
How is Latin America different regarding compliance when compared to other regions?
In terms of minimising risk from accounting and tax compliance, Latin America is comparable to any other region in the world. Many countries have regimes that are more sophisticated than those in more “established”
economies, which can take foreign investors by surprise.
What are the opportunities and challenges for businesses to apply business ethics in their online trading?
Doing business ethically perhaps receives less attention in this region than in say, Europe, but that trend is changing. The rich-poor divide in many Latin American countries arguably gives more scope to companies who want to show their local customers that they are making efforts to grow sustainably by supporting disadvantaged communities rather than setting up in Latin America in order to take profits out of the country or region.