There have been a number of requests coming in to cover the basics for Brazil Nota Fiscal Inbound. Remember, that the validation of all inbound supplier Nota Fiscals is mandatory. Many companies are still accomplishing this manually. One company had over 15 individuals manually entering supplier invoices into the government portal. Another company had over 20. It is important to remember that you can automate and should automate this process. Below I discuss how you should focus on the Inbound process and the 3 types of invoices you will have to deal with: NF-e Goods, NF-e Service, and CTe – Transportation Invoices.
First it is important to distinguish what you have to do versus what you should be doing with the inbound XML in Brazil.
- What you have to do I call – “Okay to Deduct” this consists of the required government validation of the XML and in Brazil, the subsequent posting of those codes to the SPED reports. It is also important to remember that the major change of “Recipient Acknowledgement” which is part of the Eventos legislation will be affecting many industries in 2013 and 2014. Currently, this process is required for Oil & Gas companies dealing with retail distribution.
- And then there is what you should be doing, which I call “Okay to Pay”. The Brazilian model of einvoicing has created a unique environment to maximize the 3 way match process in Brazil. Many lead organizations are using the XML and the paper representation (called a Danfe) in order to simplify their inbound receiving process at the warehouse and automate the approval for payment of the invoice.
NF-e for Goods vs NFS-e for Services vs CTeGoods Oriented NFE
- Taxes assigned at State level, so much higher adoption and standardization
- Digitally signed by emitter for non-repudiation and authentication to receiver
- Electronic file is the legal invoice – paper visualizations for human comfort only
- Invoices must be registered and approved before being sent
- Printed DANFE must accompany goods in transit for validation en route
- Inbound invoices must be validated and there are new “Eventos” processes taking place to eliminate ghost transactions.
- Archive for 5 years by sender
Service Oriented NFS
- Tax is assessed by Cities, so Integration Points are at City Level
- Standardization came slowly but is advancing now (ABRASF followed by 50 cities, Sao Paulo migrating)
- Can have many line items, but only one type of service per NFS.
- Can deliver services and then invoice later, this is not a problem.
- Can be withholding requirements for certain service types
- NFS number and Return Code provided by the City
- City calculates the tax for you – you make FI adjustments if needed.
- City does the validation, buyer doesn’t have to worry about anything, except withholding, if applicable
- Cancellations allowed within 30 days or 5 days after start of new month, whichever is earlier
- Archive for 5 years by city
Types of Inbound City Level Connectivity
- Fully Integrated Web Service – there are a number of cities that offer a fully functioning web service integration. This allows companies to use the web service to call the city system and download their service invoices directly into their environment.
- Partially Automated — there are a larger majority of cities that utilize this process currently. While they use a standardized format for the invoice collection, the actual triggering event is manual. Many of the customers’ I work with will deploy a special ABAP extension that allows them to upload the invoice files directly into a staging table.
- Manually – it is important to understand when working with city level integration that many of them are still in a manual mode. There won’t be a complete way to automate these cities.
What is the CT-e:
Brazil Transportation Document – is issued and stored electronically in order to document the provision of transport services, whose legal validity is guaranteed by the issuer’s digital signature and authorization of use provided by the tax administration. Examples of use would be a Waybill (model 10) or an Invoice for Transportation Service (model 7 when transporting cargo).
The inbound process in Brazil is very complex because of the 3 types of invoices. Many vendors including the ERP vendors are not able to support the entire process – especially Service Invoices and CTe. Ensure you are working with someone that knows how to implement and ensure you are working with someone that understand how to take advantage of the process to simplify the 3 way match.