Rejecting Chilean Electronic Invoices
During 2014, Law No. 20,727, stipulated the mandatory use of the electronic invoices for all Chilean companies, along with other electronic tax documents such as invoice settlements, debit/credit notes, and purchase invoices. The new law would start gradually for larger companies and then in January 2018 for all Chilean companies no matter the size.
With this change, there is now the possibility of using the invoice as an undisputable evidence that a service or sale has been provided, and therefore, that a debt is owed to the provider. In short, this means that an accepted invoice has the same legal value as a cheque, a promissory note signed before a notary, or a sentence issued by a judge. However, to have this effect, once the invoice is issued, the receiver or payer must not have rejected the invoice.
The law previously ruled that the payer had 8 days to reject the invoice or 30 days as a cap if by agreement between the parties gave themselves more time.
Now, from this year on, the time has been reduced in all cases to only 8 days.
This can be problematic because almost all companies have electronic invoices and a payer is only a click away from either accepting or denying an invoice which can lead to significant consequences for the company if not done properly.
For example, we recently had a case where a large multinational company was invoiced by a construction company for services worth more than USD$1.000.000 even though there was disagreement regarding the work completed. One of the junior accountants working for the company did not reject the invoice within the 8 days and the company is now liable for the invoice with little recourse.
In this regard, companies must be very aware of the short 8-day deadline and understand the legal reasons as to why it can legally accept or reject an invoice.
From a legal perspective, the invoice shall be irreversibly accepted, if it is not explicitly rejected because of the invoices contents (there is a mistake) or the goods/services were not delivered or only partially delivered.
Rejecting an invoice should be done by the following procedures:
- Returning the invoice and the related documentation, if applicable, at the time of the invoices delivery, or
- Claiming against the invoices content (there is a mistake) or the goods or services were not delivered or only partially delivered. This should be done within eight calendar days following the receipt of the invoice. In this case, the claim must be brought to the attention of the issuer of the invoice by certified mail, or by any other reliable means. This needs to be done in conjunction with returning the invoice and the applicable documents, or together with the request for issuing the corresponding credit note through the online system.
In practical terms, every company receives and sends their invoices through the tax office website. As soon as someone invoices the company, they will automatically receive it. They can simply reject the invoice online and the provider will be notified.
The Chilean IRS has added that the date in which the 8 days starts is once the tax office has received a copy (Circular No 4 from January 11, 2017) of the invoice. This should all be done automatically, online, so at least in theory, the IRS should immediately receive an electronic invoice copy.
The big change is that once the 8 days have gone by and there is no rejection from the payer, the seller may cede the invoice to a third party to collect the payment (factoring) without the need of waiting for the “acknowledgment of receipt” within the 30-day period as before.
This means that now, more than ever, companies must have a good understanding of the importance of accepting an invoice or rejecting it within the 8-day period and the reasons as to why they may do so. For this matter, companies need to be clear during this short period on whether the goods or services were duly delivered and therefore have a quick turnover either accepting or rejecting the invoice. Not doing so will automatically mean they have accepted the work or the goods provided.
It is normal for foreign companies with limited staff in Chile to have someone, anyone, receive the online copies of the invoices. It would not be unheard of for a secretary or junior accountant to mistakenly accept an invoice without knowing if the service has been provided in full or not.
Our recmondations are the following:
- In practical terms, we strongly suggest reviewing who within the company receives notifications through the online system.
- Our second suggestion is to provide training to the chosen person so that they understand the importance of the procedure and how the system works.
- Our last suggestion is to put in place some type of procedure so that invoices can be reviewed quickly and then approved or rejected depending on the circumstances. This could mean giving a purchase order number for accepted expenses that can then be added by the supplier to the electronic invoice. If there is no purchase order number then the person responsible can simply reject the invoice.
Harris Gomez Group is a Common Law firm, with offices in Santiago, Bogotá, and Sydney. We also have legal teams in Mexico, Peru, Brazil, and Argentina. Over the last 16 year,s we have been supporting foreign companies with their growth in Latin America. Many of our clients are technology companies, service providers and engineering companies that focus on the mining, energy and infrastructure markets.
To better understand how we can support your management team in the Region, please contact Cody Mcfarlane at email@example.com