FDI, which stands for Comprobantes Fiscal Digital por Internet, is the electronic billing schema defined by the Mexican federal tax code. It has been mandated for companies doing business in Mexico since 2011. The goal of CFDI is added visibility into companies’ tax liabilities, so that the government can ensure it is receiving accurate payments, and it has paid off. Audits based on the legislation resulted in a 34% increase in VAT collections in a single quarter.
Below are the basics you need to understand CFDI in Mexico:
- Obtain a Registro Federal del Contribuyente RFC (Mexican Tax ID).
- With the RFC, apply for FIEL (Firma Electronica Avanzada). It is based on PKI (Public Key Infrastructure) to identify and verify the information about a tax payer before the SAT (Mexican Tax Authorities).
- With the FIEL, apply for CSD (Certificado Sello Digital) to be used with CFDI process flows.
- Have a solution provider capable of mapping your proprietary invoices into XML v3.2 defined by Anexo 20 (the SAT is currently working on CFDI v3.3) of the Mexican tax code Miscelania Fiscal. This is by far the most underestimated issue with CFDI invoices, as no customer accounting system is configured the same. Additionally, your customer specific requests can also create an integration nightmare to force your data into the government standard (not just once, but across all the different variations you have in your business and all the different variations requested by your customers).
- Identify what required data is missing in your ERP – for example there are some data elements that are required by the Mexico tax authority but are not captured in SAP. Understand what is missing and determine how you will provide this information to the government.
- Apply a digital signature known as a sello with the CSD.
- Validate the XML syntax to obtain the “Timbre Fiscal” or government seal.
- You must store the “Timbre Fiscal” in your back-end accounting system.
- You must print out the invoice, which now includes the “Timbre Fiscal.” Place a copy on the truck at the time of shipping – similar to the Brazil Nota Fiscal model.
- By law, you must make the signed XML available to your end customers.
- Most companies will send the signed XML invoice and the PDF rendering to the customer via email, but other channels exist, such as B2B communications or uploading to a customer portal.
- These invoices must be stored for a minimum of 5 years.
- If you have to change the invoice, you must first cancel the original invoice with the government and generate a new one; otherwise, you will still be on the hook for the older invoice’s tax implications.
- Note: Large customers can make the process more complex by requesting “Addenda” information. An Addenda is a specific space within the government XML where you can put specific information. For example a company like Wal-Mart might want the supplier to put the PO # in the Addenda, so it can expedite the payables process. The government does not care about this information, but customer requirements can make the entire process much more complex when a customer requests a lot of additional information on the PDF printout that is specific to them.
- As a buyer, when you receive the XML invoice, the laws state that you need to validate that the XML is authentic and registered with the SAT and then archive this XML for 5 years. It will be the fundamental document if there is an audit.
- Understand that this process will evolve over time, so have a strong change management strategy and process in place.
In addition to electronic invoicing, the SAT mandated electronic accounting in 2015, requiring companies to submit their chart of accounts, trail balances and journal entries.Below are the basics you need to understand electronic accounting in Mexico:
- Chart of accounts is sent once and then again every time it is modified. This requires a process of mapping your chart of accounts in SAP with the SAT specifications.
- Trial balance is sent monthly, no later than the 3rd day after the second month. It must be sent at the main account level and seconadary account level. This is an extraction for each single account by period showing initial balance, account movement and final balance.
- Journal entries (Polizas) are mandatory and must be submitted upon the government's request or if you request a tax refund or compensation back.
- All of the information is submitted through buzon tributario and each document must be signed with your company’s electronic signature (FIEL). Click here to understand the hidden issues in mexico electronic accounts reports.
- All of the UUIDs (unique identifying codes) need to be included for all fiscal transations in gastos (expense reports) and nomina (payroll). This is the most difficult part of electronic accounting because these transactions can have many XMLs associated with a single SAP document.
The Mexican government has created an environment in which everything is tied to an XML and UUID – every purchase, every credit/debit note, every journal entry and every VAT report. If any link in the chain is missing, or if there is any error at any point, an electronic audit is inevitable. Built-in matching and validations ensure that any missing links and errors are identified and addressed before they become an audit risk.
To learn more about Mexico’s e-Invoicnig and eAccounting requirements download Mexico CFDI e-Invoicing 101.
