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Mexico: Electronic Invoicing and Reporting Requirements Mexico is a pioneer in electronic invoicing and VAT enforcement, having begun its digitization journey in 2010. Today, Mexico has one of the most technologically advanced tax administrations in the world. Companies unaware of or unprepared for Mexican e-invoicing mandates could face significant fines and penalties, along with supply-chain disruptions and cash-flow issues. This document provides an overview of mandates and regulations in Mexico. Regulatory overview The core of the e-invoicing mandate of Mexico is the CFDI, the Spanish acronym for an electronic invoice. In developing e-invoicing mandates, the Mexican tax authority, the SAT, has required additional information to supplement the CFDI. That information can exist either as a special type of CFDI or as an addition to the CDFI itself, known as a “complemento” in Spanish. There are many types of special CFDIs and complementos. This list includes the most relevant. Glossary CFDI: Comprobante Fiscal Digital Por Internet, or Digital Fiscal Proof via the Internet, is the e-invoice itself. The CFDI replaced the CFD, an older form of invoice. Supplement of Payment: Complemento Para la Recepcion de Pagos is perhaps the most important supplement to a CDFI. It affects all transactions where a partial or complete payment is received after a CFDI is issued. This is also known as Complemento de Pagos. Payroll Supplement: This is also known as the Complemento de Nominas or Recibo de Nominas of the CFDI. It is the only CFDI supplement that is not related to a sale or purchase transaction. It comes into play any time an employer pays wages, salaries, or similar payments to its employees. This invoice is mandatory to all employers; without it, the expense on wages is not deductible from income tax, and the omission is subject to multiple sanctions. Foreign Trade Supplement: This is what is known as Complemento de comercio exterior , or COMEX . This is a very important and complex supplement required on CFDIs related to type A1 foreign trade transactions. It allows the identification of exporters and importers and provides a more precise description and better traceability of the goods involved in the transaction. Foreign Exchange Supplement: This supplement is mandated for use by financial and other entities involved in the foreign exchange business when selling or buying foreign currencies. Digital Fiscal Signature Supplement: Complemento para timbrado fiscal digital certifies the validity and certification of an invoice generated by the CFDI certification provider (PAC) once the document has been digitally stamped. Document Types Accounts Receivable (CFDI): Receivables must be approved by the SAT before a seller can send an invoice. Accounts Payable (CFDI): The SAT must validate all domestic invoices from suppliers for companies to justify VAT deductions. Export Invoice (Comercio Exterior): Is a complemento that must be incorporated in the CFDI when taxpayers are exporting goods with pedimento code “A1”. Logistics Document (Traslados/Carta Porta): This document is used for moving goods inside the country. It proves ownership of the goods in transfer. ePayment Receipt (Complemento de Pagos): This supplement must be incorporated in the CFDI when issuing partial or deferred payments that will be issued for the receipt of payments. Electronic Payroll (Nomina): Electronic payroll mandates require Mexican businesses to sign payrolls using unique digital stamps. Once the payroll is stamped, the company sends its XML and PDF versions to employees by mail or in person. eAccounting (Contabilidad Electrónica): Due for Chart of Accounts, Trial Balances and Journal Entries, which need to be linked to government CFDI XML approval codes known as UUID. Document Components Universally Unique Identifier (UUID): This is the unique number provided by an authorized certification provider (PAC) that makes an invoice unique and allows the SAT to track the einvoice. UUIDs contain a code of 32 characters. Electronic Signature (FIEL): Electronic invoices must have a digital signature to authenticate the integrity of the invoice. Digital Certificate (Sello Digital): This certificate generates electronic signatures in the CFDI and allows the tax authority to identify the issuer of the document, guaranteeing the integrity and authenticity of the invoice.Timbre: Certification from the PAC that makes makes the invoice fiscally valid. This process consists of verifying the information, validating the invoice and adding a digital stamp that verifies and confirms that the invoice has been certified. Addendas: Allows taxpayers to include additional commercial information in the CFDI. QR Code: The printed representation of the invoice that must incorporate a two- dimensional bar code. Processes Contingency: Contingency is mandatory for all documents if systems are down or a company cannot submit electronic documents. eCancellations/Acknowledgement: Vendors must send a notification to their clients before cancelling an invoice. The client must accept or reject the cancelation notification within 72 hours. If the client does not respond, the invoice will be cancelled. Validation: The SAT requires that companies send all e-invoices in real time. A PAC must validate each invoice before the seller can ship goods to the client. Synchronous Process: All CFDI documents must be reported and validated by the tax administration in real time. Buzón Tributario: This e-mailbox function allows the SAT to send notifications to companies electronically in a method that is faster, more reliable, simpler, more convenient and more secure than using paper. It also keeps a digital record of all correspondence between the taxpayer and the tax administration. Auditorías Electrónicas: The SAT has the ability to review information digitally, determine if there are any inconsistencies in accounting records and apply electronic audits as appropriate. Archiving: All documents must be archived for five years. Glossary (cont’d) Supplement for Fuels Accounts Status and Electronic Wallets: Complemento para el estado de cuenta de combustibles para monederos electrónicos is intended to identify the type of fuel and fee that applies to the sale of gasoline and diesel in accordance with article 2-A of the Law on Special Tax on Production and Services (IEPS). Supplement for Donations: Complemento para Donatarias is required when a donation is made to a non-profit organization. It is mandatory in order to make the donation tax-deductible. Fiscal Legends Supplement: Complemento de Leyendas Fiscales is intended to include all the fiscal notes that are mandatory but not included in the technical standard of the CFDI. Cancellation of CFDIs: The process for cancelling an electronic invoice in Mexico changed dramatically with the introduction of the Miscellaneous Fiscal Resolution of 2017. The new procedure became effective on November 1, 2018. It requires suppliers to submit a cancelation request instead of credit notes to void a previously issued invoice/CFDI. In addition, it requires the buyer to accept or reject the request within 72 hours. About Sovos Sovos is a leading global provider of software that safeguards businesses from the burden and risk of modern tax. As governments and businesses go digital, businesses face increased risks, costs and complexity. The Sovos Intelligent Compliance Cloud is the first complete solution for modern tax, giving businesses a global solution for tax determination, e-invoicing compliance and tax reporting. Sovos supports 5,000 customers, including half of the Fortune 500, and integrates with a wide variety of business applications. The company has offices throughout North America, Latin America and Europe. Sovos is owned by London-based Hg. Contact us +1 866 890 3970 www.sovos.com/contact Atlanta, Boston, Boulder, Cedar Rapids, Minneapolis, Colombia, Lima, Santiago, São Paulo, Tucumán, Amsterdam, Istanbul, London and StockholmNext >