You may already aware of the growing trend of businesses being able to negotiate with tax authorities in various Latin American countries. This trend is being driven by a number of factors, including changes in tax laws, increased scrutiny from tax authorities, and a greater willingness on the part of businesses to engage in negotiations with tax authorities.
However, negotiating with tax authorities in these countries can be complex and challenging, and it is important to have a thorough understanding of the local tax laws and regulations, as well as a strategic approach to negotiations. Here are some key considerations for negotiating with tax authorities in Latin America:
- Understand the local tax laws and regulations: Tax laws and regulations can be particularly complex and challenging from one country to another. It is important to have a thorough understanding of the local tax laws and regulations, including any recent changes or updates. For example, in Mexico, businesses may be subject to a value-added tax (VAT) on goods and services, and must register with the tax authorities to obtain a tax identification number (RFC). In Brazil, businesses must comply with a range of tax rules, including the Corporate Income Tax (IRPJ) and the Social Contribution on Net Profits (CSLL). From country to country, the laws are different.
- Be prepared to provide thorough documentation: For example, the Honduran Revenue Administration Service may require the original import permit application, commercial invoices, bills of lading, packing lists, certificates of origin, phytosanitary or zoo-sanitary certificates, etc. However, it is important to note that the specific documentation requirements will vary by country and by the type of tax being assessed.
- Be proactive: Take the initiative to identify potential issues and address them before they become disputes. Be transparent and forthcoming with information, and be willing to engage in multiple rounds of negotiations. Being proactive is important, and being patient is essential.
- Seek professional guidance: Even for experienced international tax professionals, negotiating with tax authorities in any country can be complex and challenging. It is important to seek legal guidance from a tax lawyer who has experience in the given country. A CPA with international tax experience is also an important part of the negotiating team.
- Understand cultural differences: Finally, it is important to understand the cultural differences that may impact negotiations with tax authorities in these countries. For example, in Chile, negotiations may tend to be more formal and structured, emphasizing clear communication and adherence to established protocols. However, in Mexico, Brazil, and Argentina, personal relationships are often seen as essential to successful negotiations.
Understanding these cultural differences can help you navigate negotiations more effectively. CPAs and attorneys with experience in these countries and who understand the cultures will be invaluable to successful negotiations.
In conclusion, negotiating with tax authorities in Latin America can be complex and challenging. However, by understanding the local tax laws and regulations, being prepared to provide documentation, being proactive, seeking legal guidance, and understanding cultural differences, you can increase your chances of successfully negotiating with tax authorities and avoiding penalties.
The international tax team at Sol Schwartz & Associates is deeply experienced with tax matters across Latin America and beyond. If you’d like to discuss your situation with us, just complete the form below and we will get back to you promptly to learn more about your needs.