Automating and simplifying tax filing, for individualsBy Sofía Hanna | Tue, 09/20/2022 - 11:37
Q: What difficulties do freelancers face in Latin America and why is a tool like Heru necessary?
MJ: With Heru, we are building tax automation infrastructure for Latin America, making it easier for people and companies to file their taxes by automating specific processes. Many freelancers in Mexico use apps to professionalize their work but the market does not have the infrastructure to support these jobs. In June 2020, a change in the law required any individual who delivers a service or product through a digital platform to file their taxes monthly, but this group was not prepared for the change. Through Heru, we are simplifying the lives of hundreds of thousands of independent workers and freelancers in Mexico.
Q: How does Heru bring together tax information like declarations, regularizations, and invoicing into one platform?
SR: Mexico has one of the most advanced electronic invoicing regulations and, recently, the SAT has put much more pressure on these platforms. We built Heru to link a fiscal account and automatically download all invoices, returns and revenues. We started processing deductions but expanded the service to process all tax information. Users can use the platform to prepare their monthly filings or review periods that have not been reported. To bring all this together, the fiscal account generated by SAT is crucial, so we safely connect it with the app to simplify the process.
Q: How can financial processes be regularized for freelancers who do not have fixed salaries?
MJ: Recently created jobs must report income to Mexico’s fiscal authority and even if a freelancer does not receive income for a month, they still have to file taxes for that month. Latin America and Mexico are undergoing three main changes: the digitalization of work, digitalization of payments and electronic invoicing. These elements generate traceability, allowing governments to understand how much a person is making. Heru compiles a person’s credentials and tax information in a secure way so they can easily file taxes monthly and make the correct deductions.
Q: Why has Heru’s value proposition attracted investors’ interest?
MJ: Quite frankly, taxes are boring, taxes are confusing, and taxes are not sexy, but someone needs to do them. There have been few technological advances for filing taxes, and we are developing the technology that was missing and putting it in the hands of those who need it. We attract investment because the first wave of technological evolution brought about new tax implications. There will likely be a second wave of technological developments, this time addressing infrastructure. Our role will be to allow all these financial solutions to work properly and in compliance with local regulations.
Q: Heru’s largest customers include Didi and Uber Eats workers. Why are these the people most in need of your services?
SR: The change in the regulation forced these workers to report their income every month. These individuals went from never having filed their taxes to have to file them every month. Companies also had to comply with certain obligations due to the change in the law. Gig economy workers are responsible for filing their own taxes, but if they do not file them, their employers are responsible for withholding a percentage of their income equal to their taxes. Thus, companies need to withhold 10.1 percent of the worker’s income and transfer it to the SAT as a baseline procedure. However, once the company does that, the SAT registers that the worker is not complying with the law and another 26 percent needs to be withheld. This is without taking into consideration the commissions the platform takes, so skipping taxes is a burden for companies and workers.
We allow workers to focus on making more income and we take care of the rest. This group needs Heru, but every taxpayer should be able to have this peace of mind.
Q: Besides growing in the Mexican market, what are Heru’s expansion plans?
MJ: Fortunately, the way our technology is built allows us to easily adapt it to different laws. In Latin America, the laws for tax filing processes are overall similar but require an understanding of their different specifications. Our B2B partners are also asking us to go to other countries where they have faced similar problems as in Mexico. We are very excited to do so but we also want to expand carefully.
Mexico is our first market, and we are proud of it, so before we move to other countries, we need to have the best version of Heru available. After Brazil, Mexico has some of the region's most advanced payment and invoice digitization processes. We will continue developing the platform before expanding.
Q: What are the next steps for Heru?
SR: In the short term, we plan to expand beyond freelancers and independent workers. Many in Mexico need a platform like Heru, even those whose employer files their taxes. With the digitalization of the workplace, some workers have a second job that requires them to make their own filings. We are expanding our app and services beyond tech platforms and independent workers to help other groups.
MJ: We built a great tool for certain individuals, but we are exploring how to make it available to everybody and add our services to other existing technology. It might be possible to embed our technology into that of companies, neo-banks, or banks so they can include it in the services they offer. We also want to strengthen our relationship with the businesses we work with and build solutions for the networking web we developed.
Heru is a tax filing app that is also becoming a one-stop solution for the self-employed in Latin America.