Like other tax authorities in Latin America, the Directorate General of Internal Revenue (DGII) wants to reduce tax evasion and increase revenues received from trading transactions to invest in public infrastructure and services. It intends to achieve this goal using the Comprobante Fiscal Electronico (e-CF) i.e. electronic Tax Receipt.
The increased adoption of these continuous transaction controls (CTCs), as they are increasingly known, has certainly become a megatrend in the world of VAT. However, the manner and means by which digitization is used to achieve VAT reform, differ substantially from country to country. The variance in approach, combined with the pace of regulatory change as new countries join the CTC collective, means this global wave of legislation is particularly challenging for multinational companies.
As the trend towards CTCs emerged and subsequently spread throughout Latin America, then around the globe, Sovos established and fortified its position as a trusted compliance partner especially among multinational companies during this decade of intense digital tax transformation.
However, CTCs create a challenge of such magnitude that it’s too onerous for an enterprise software company working in isolation to keep up with all the developments in all countries. SAP and Sovos recognized that it takes intelligent collaboration to ensure SAP customers can continue to comply with CTC mandates as these continue to be rolled out around the world.
SAP and Sovos have partnered successfully around compliant e-invoicing for over a decade. The long-standing relationship was initiated between TrustWeaver (acquired by Sovos in 2018) and Ariba (which was acquired by SAP and subsequently became SAP Ariba in 2012). More recently, SAP and Sovos have strengthened this productive partnership by collaborating around a brand-new SAP extensibility concept.
The inaugural outcome of this latest collaboration has been Sovos building the first, fully-fledged CTC back-end solution using the associated partner API. While Sovos’ first solution extension for SAP Document Compliance is focused on mandatory electronic invoicing in the Dominican Republic, the potential created by the SAP extensibility initiative is vast, and this really is just the beginning.
CTC requirements in the Dominican Republic
The Dominican Republic is considered one of the new entrants to the electronic invoicing revolution that has swept through LATAM. The country’s tax administration, the Directorate General of Internal Revenue (DGII), shares similar objectives to many other countries in the region with its key aim being to reduce tax evasion.
Having seen the success of its neighbors, the DGII is looking to the Comprobante Fiscal Electronico, i.e. electronic Tax Receipt (e-CF), as a remedy that will also raise much needed tax revenue to support public infrastructure and services.
Launched on 29 February 2019 with decree 254-06 as its legal justification, the CTC mandate in the Dominican Republic impacts a wide range of fiscal documents including domestic and export sales invoices, purchase invoices (receipts), as well as credit and debit notes.
The Sovos solution for e-invoicing on the SAP S/4HANA Cloud
Companies in scope for the Dominican Republic e-invoicing mandate clearly need to find a way to meet their obligations. Leveraging the extensibility features of SAP S/4HANA Cloud, Sovos has built a cloud solution capable of integrating with the SAP back-end system in the Dominican Republic.
The Sovos solution handles mapping of the payload from the fiscal document into requisite XML format, consolidation and transmission of the file to the tax authority for clearance. The various outputs, including acknowledgements, XML file and PDF (if generated) from the clearance process are then sent downstream to the originating SAP eDocument Cockpit where the user can monitor and validate.
Sovos solution for e-invoice clearance in the Dominican Republic
The following steps can be distinguished:
- The invoice, credit or debit note is created in the eDocument Cockpit transaction in SAP S/4HANA Cloud.
- Its payload is transmitted to the Partner Integration Service for the cloud edition of SAP Document Compliance, which transmits it to Sovos.
- Sovos maps the payload into the required XML format, consolidates and transmits the file to the DGII. During this process, a digital signature will be applied to the file.
- The DGII performs the clearance process and sends the result downstream whereby Sovos will send the result to the eDocument Cockpit along with the government XML file and the trackID.
- The eDocument Cockpit will send a generic status of “Accepted” or “Rejected.”
Expanding further on key aspects of the process, each fiscal document (domestic and export sales invoice, purchase invoice, debit note and credit note) require an identification (folio) number and an electronic signature (specifically using a valid digital certificate). When the information is submitted to the DGII, a trackID and approval/rejection notice will be returned within a few seconds.
Once the trackID has been received, associated electronic documents and their corresponding readable versions (PDF) can be distributed using the trackID as a credential. In other words, it’s not necessary for the issuer to have the final approval notice for them to forward relevant fiscal documents to their buyers. However, if the original XML is rejected, it will need to be amended and resubmitted as a new document with a new folio number.
Resolution 254-06 also considers the inbound side, by describing the process for compliant receipt of electronic documents, which is similar to other countries such as Chile. There are two acknowledgments: The Reception Acknowledgement (mandatory) and the Commercial Acknowledgment (optional). As is already the case in many other countries, these enhancements will enable the monitoring of invoice factoring while also improving cash flow processes in the country.
For more details on the Sovos Solution, please see the Sovos eInvoicing Dominican Republic Customization Guide. For more details on the Partner Integration service for the cloud edition of SAP Document Compliance, please see the link on the SAP Help Portal.
What do I need to do to use Sovos compliance services?
Sovos must configure several settings in the Sovos solution backend. Configuration steps include uploading of the digital certificate and the e-CF number sequence. During the integration project the Sovos configuration will be done by the Sovos Professional Services team. You will be guided through this process as part of the implementation project.
Once you complete your configurations on the SAP backend system, the system will submit a file cloud that fully adheres to the DGII’s legal and technical requirements to be validated, transformed, signed, submitted, and distributed by the Sovos Cloud.
We would be interested to hear your thoughts on this solution and/or the joint endeavor between SAP and Sovos that led to it, so please do share your feedback in the comments section.
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