Meeting the market's demand for tax compliance software

Friday, February 4, 2011

Last year, the Brazilian treasury compelled some 180,000 companies to file invoices digitally. By 2014, that number will grow to about 3.5mn.

As the Brazilian treasury expands the industries required to meet the government's e-tax reporting requirements, more and more businesses are looking for IT solutions to facilitate compliance with the new standards. Multinational fragrance and flavor company Givaudan recently selected solutions from Sonda Software, a Brazilian unit of Chilean software company Grupo Sonda IT, to help handle the revenue reporting. Givaudan, like many Sonda Software clients, already employed an enterprise resource planning (ERP) system from German software firm SAP (NYSE: SAP) and will use the additional purchases as complements.

Sonda Software's fiscal and foreign trade programs - including a new SPEDI Pis-Cofins offering intended to address guidelines going into effect this June - increasingly account for bigger shares of Sonda's overall bottom line in Brazil, business director Afonso Pietroniro told BNamericas. Today, the software brings in about 30% of Sonda Brasil's 800mn reais (US$480mn) in revenues.

BNamericas: Compliance with tax reporting regulations is a hot topic right now in Brazil, as the government tries to digitize the process. Meanwhile, you just closed a deal with multinational fragrance and flavor company Givaudan to use Sonda solutions for its fiscal, accounting and import declaration needs. What sort of benefits can you bring to a company like Givaudan? What are the expectations for a partnership like this?

Pietroniro: I'm going to start off talking about SAP's global ERP project, which is localized here in partnership with Sonda Procwork. Sonda software is complementary to SAP's ERP. Within this list of software, we have fiscal software called Pw.SATI and software for foreign trade called Pw.CE.

Concerning accounting in Brazil, the great benefit for our clients is that we help to meet legal obligations on the federal, state and municipal levels.

Now, within the tax reporting software, there are some new products - SPEDI Fiscal, SPEDI Contabil and SPEDI Pis-Cofins. These are products that are coupled with the original fiscal software.

The foreign trade packages are offered in different modules, because we have businesses that work with both exports and imports. In Givaudan, for example, they have a foreign trade module for imports, which is being used in Argentina, Mexico, Colombia and Brazil.

It's important to point out that the foreign trade software is developed in the same language as SAP. So it's multilingual. It works in English, Spanish and Portuguese. So, you don't have an interface. It's being used in various countries around Latin America. We even have it being used in the US and China now.

BNamericas: How does attending to clients with operations across different countries and regulatory schemes impact your product offerings?

Pietroniro: Apart from the foreign trade solution Pw.CE, our fiscal software - Pw.SATI and SPEDI Fiscal, Contabil and Pis-Cofins - is only marketed and used in Brazil. They meet the accounting bylaws only in Brazil. In all of the countries outside of Brazil, you issue an invoice and SAP is able to help you handle all of the requirements.

But Pw.CE is used in all of the other countries to help with imports and exports. Each country has its own framework and regulations, so our software addresses the particulars of each country that SAP doesn't cover.

These solutions are completely customized. We had to develop our product in accordance with the laws of every country. For example, we had to have a version to work with foreign trade for Argentina, with different import codes than Brazil, and the same for Mexico, Chile and Colombia. We say that we're localizing our software in every country.

BNamericas: Why do companies need a special line of software for accounting in Brazil? What makes this country different or more difficult to navigate?

Pietroniro: Brazil isn't more difficult; it just has a more complex tax scheme. There's a peculiarity in Brazil: at the moment when you issue an invoice, you have a lot of controls after the emission. There are a lot of legal obligations coming from the federal government, which requires a lot more information.

For this reason, we have software that complements the SAP system. They don't compete with SAP, they complement. And in Brazil specifically, this additional tax reporting software was needed for companies to be able submit all of the mandated items.

BNamericas: Now, at least in Brazil, the laws regarding tax reporting seem to be changing quite rapidly. How do you stay ahead of, or at least up to speed with, your clients' needs?

Pietroniro: We have a product team of some 200 professionals who everyday are reading the newspapers and the government's official communications. So we find out about the legislation and develop our products accordingly, so that we can attend to the more than 600 clients using our foreign trade and tax reporting software solutions.

BNamericas: Can you give a few examples of these more than 600 companies?

Pietroniro: Today, we have some of the biggest economic groups within Brazil using our software: Petrobras and its [employee pension fund] Petros, Grupo Votorantim, Grupo Gerdau, for example.

BNamericas: And are there particular sectors that are demanding your solutions?

Pietroniro: We have all types of companies. We have pharmaceutical, petrochemical, agribusiness. Our software is in all of Brazil's economic sectors, really. From producers to wholesalers and distributors, we serve all market segments.

BNamericas: And what are your plans for investing in the fiscal and foreign trade aspects of your business this year?

Pietroniro: I don't have any exact numbers that I can share in terms of investment. But speaking of strategies, I can say that we have a strong commitment to the sector with a large team of professionals in service, product development and delivery.

BNamericas: Approximately what portion of Sonda's revenues in Brazil does this segment of the business account for?

Pietroniro: Right now, about 30-35%.

BNamericas: And is that a figure that's fairly stable? Shrinking? Growing?

Pietroniro: Growing. Across the board, Sonda Software is adding about 5% more per year to Sonda Brasil's total, which is about 800mn reais [US$480mn]. And Sonda Software's two principal products are the tax reporting and foreign trade offerings.

BNamericas: What is the biggest new development on your radar for this year?

Pietroniro: Without a doubt, it's the SPEDI Pis-Cofins, which addresses a new government requirement that's going into effect in June 2011. This is going to be the highlight.

BNamericas: What has being a SAP partner done for Sonda in Brazil?

Pietroniro: We have this partnership with SAP because of our understanding of Brazil. So, in one form or another, we are consulted for all of SAP projects in Brazil, and participate in the package put forth by SAP to clients when they enter the country.

They at least present us to clients for a pre-sale phase as providers of solutions needed to comply with legal regulations. So we have a very close relationship, I would say.