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6 Ways Electronic Invoices Works with the Mexico’s Tax Law

Oswaldo Jiminez Wed, Feb 07, 2018

electronic invoice

Understanding Electronic Invoices and Mexico Tax Compliance

Companies in Mexico started using electronic invoicing back in 2004 as a way to make transaction processes more efficient. This also helped save money on the cost of using special paper and maintaining specially licensed printers. It didn’t take long for the government to implement this technology as a way to improve their tax collection efforts. In 2010, the Mexican federal Tax Administration Service or Servicio de Administracion Tributaria (SAT), instituted electronic invoicing to be mandatory for companies with over $4,000,000 pesos of annual income.

Starting in 2014, electronic invoicing became a requirement for taxpayer compliance. All business must generate an electronic invoice and the SAT automatically gets visibility of all purchase/sales information less than 72 hours after its creation.

6 Things to Know about the New Mexican Electronic Invoice Requirements

1. Understanding the New Electronic Invoice (CFDI) - The electronic invoices or Comprobante Fiscal Digital por Internet (CFDI), is an electronic receipt that details the services or goods, their cost and taxes, and subtotals and total.The electronic invoice (CFDI) is the digital version of invoices that were previously made on paper.

• Each CDFI includes 2 separate files with an electronic invoice – an XML file, which has validations and stamps but is difficult to read, and a PDF file that’s the graphic representation of the XML file. Each taxpayer has an electronic signature (FIEL) that is used on the XML file to sign the document and prove authenticity that this is company issuing the CFDI.
• Each CFDI is issued by a taxpayer is sent to a third party (PAC) that makes sure the information and structure are correct and puts an electronic stamp on the XML file, which ensures the XML won’t be modified after the PAC has approved it.

2. Who Should Issue Electronic Invoices? - All entities (Moral or Fisica) who have an income from their economic activity are required to issue an electronic invoice. In Mexico, the electronic invoice is the only fiscal document recognized by the SAT, so it’s obligatory for those who carry out economic activities, receive an income, and make a withholding or payroll.

3. Requirements for Electronic Invoice - The requirements established by SAT for a company to issue electronic invoices are as follows:

• Register with SAT as a “Moral” or “Fisica” entity
• Get a Firma Electronica Avanzada (FIEL)
• Get your Certificado de Sello Digital (CSD) – this is a unique digital stamp
• Hire a third party Authorized Certification Provider or Proveedor Autorizado de Certificación (PAC) to validate and stamp your invoices. Your PAC is responsible for keeping track and making your invoices available with backups of your activity for future reference.

4. How to do an Electronic Invoice - Regardless of the system used to generate a CFDI, this is done in two simple steps:

• The provider generates the electronic invoice with the buyer’s data as he did in its paper version and automatically places his signature and an electronic certificate to send it to the PAC. If the invoice structure is correct, the PAC returns the invoice with the stamps. This can be done in seconds.

• With the XML file, the ERP system creates the PDF version so the provider sends the invoice in XML format to the customer along with the PDF version.

• The graphical form of CFDI (PDF) is variable – every company has their own needs regarding the information requirements from their customers.

You can have Addendas and/or Complementos, which allow you to include additional information, like a PO number or a bank reference.

However, there are five elements that cannot be missing in a CFDI for its validation.

• Folio Fiscal or UUID (Identificador Unico Universal)
• Date the invoice was stamped
• Comprobante fiscal digital stamp
• SAT certificate
• SAT seal

5. Benefits of Electronic Invoice - Electronic invoices simplify the invoice process, reduce administrative costs, and benefit taxpayers in several ways, including:

• Improving invoice validation process
• Growing up the use of ERP systems
• Improving estimated time to receive invoices
• Increasing ability to process account receivables
• Reducing the number of fake invoices

6. New changes CFDI 3.3 - In 2016, SAT released new requirements for the CFDI, which they called CFDI version 3.3. This new version improves the use of master files for some information like zip codes, items, services, cities, etc. Migration to the new version began July 1, 2017, although taxpayers will have until December 1, 2017 to comply with the new requirement.

To learn more about CFDI structure, you can visit the SAT website and search for “electronic invoicing” or “factura elecrónica”; all the detailed specs for it are compiled on Anex 20.

For other questions about Mexican tax law and electronic invoices can help you sort it out, contact us today.

About Southeast Computer Solutions

Southeast Computer Solutions is based in Miami, Florida and has additional operations in Mexico. For over 30 years, we have positively impacted the success of small and mid-sized businesses with effective business management implementations that improve our clients’ operations. We listen, we are accessible, and we care. Learn more by visiting our website or calling 305-556-4697.

Southeast Computer's blog by Oswaldo Jimenez on October 23, 2017 How to Understand Electronic Invoices in 6 Simple Steps

Image courtesy of freedigitalphotos.net by Stuart Miles