Mexico’s New E-Invoicing Requirements: CFDI Background and Compliance Requirements Jason Busch - June 4, 2013 6:13 AM | Categories: Commentary | Tags: e-Invoicing, Interviews, L1, Mexico Mexico recently accelerated the implementation of its e-invoicing requirements. The compliance requirements under the Comprobante Fiscal Digital por Internet (CFDI) are complex by any electronic invoicing standard. In a multi-part series featuring an interview we recently conducted with Invoiceware’s CEO Scott Lewin and VP of Marketing/Product Strategy Steve Sprague, we’ll cover everything you need to know about the requirement, beginning today with the legal and compliance background and compliance elements: Spend Matters: Can you explain the Comprobante Fiscal Digital por Internet (CFDI) in 30 seconds or less for us? Invoiceware: CFDI is a business process and a data format mandated by the Mexico SAT for invoicing in country. The requirements affect both Account Receivable and Account Payables. All companies with over 250,000 Pesos in annual revenue and are selling or purchasing from another domestic RFC (Mexico Tax ID) are required to comply with the CFDI legislation. This law is not applicable to foreign invoices (i.e. cross-border invoices). For each individual invoice you produce in Mexico, you: Must map your accounting system into the XML v3.2 defined by Anexo 20 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. You must apply a digital signature known as a Sello with your government assigned certificates. You must receive and store the “Timbre Fiscal," the government seal, in your back-end accounting system for each invoice You must print out the invoice, which now includes the “Timbre Fiscal” and the strictest following of the law states you should 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 customers (the buyer). 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 five 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 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 that you can put specific information. The government does not care about this information, but a Wal-Mart, for example, might want the supplier to put the PO number in the Addenda so they can expedite their payables process. As a buyer, when you receive the XML invoice, the laws state that you need to archive this XML for five years, as it will be the fundamental document if there is an audit. Because this will be the proof, it is automatically assumed each buyer will validate each invoice with the government prior to archiving. You don’t want to archive bad invoices as they will cause issues during the audit especially if they are used to deduct the VAT in remittances to the government. Spend Matters: That was not quite 30 second, but OK! Did the recent announcement contain any variations on what was expected? Invoiceware: There were two fundamental changes that have been expected by the companies that follow the Mexico government (like Invoiceware International) on a weekly basis: First, over 90% of invoices in Mexico were following a legacy batch format called CFD. Most companies were “grandfathered” into this fiscal regime as long as they could prove they were active with CFD prior to January 1, 2010. CFD is repealed and organizations over a certain revenue tier must transition to CFDI. The revenue tier was expected to be lowered from 4 Million Pesos annually to a smaller threshold. The government lowered the tier to 250,000 Pesos, which is approximately $20,000 US Dollars a year in B2B revenue. This covers most businesses and creates a dramatic requirement on virtually all corporations and small businesses. Stay tuned for Part 2 in this series when we explore why the requirement was fast-tracked, the scale of the requirements (and overall business impact) and tax/revenue implications for Mexico. Discuss this: Cancel reply Your email address will not be published. Required fields are marked * Name * Email * Website Comment Notify me of follow-up comments by email. Notify me of new posts by email.