CFDI or Mandatory e-Invoicing in Mexico: Challenges and Opportunities

Between 2005 and 2013 in Mexico, some 10 billion electronic invoices were issued. Taking into account that these data have been growing exponentially in recent years, it is easy to suppose that this figure will have grown considerably by the end of 2014

But what is the reason for such widespread use of e-billing in Mexico? Mainly the fact that use of the CFDI, which is how the electronic tax document used to issue invoices is designated, is mandatory. Nobody can have missed the fact that the monitoring of invoices, as a support to document business transactions, will prove very useful to the tax authorities to ensure due payment of the taxes associated with every trading operation.

In this sense, the SAT or Mexican Tax Administration Service has developed a system whose principal raison d’être was to exert this control, in such a way that only those bills declared online to the SAT with the pertinent electronic certification will be legally valid for tax purposes.

But beyond the obligation, electronic invoicing provides key competitive advantages for companies: Better control systems, greater efficiencies, lower costs, shorter response times, etc. Achieving this level of efficiency calls for something more than simply issuing electronic invoices of an obligatory nature. An improvement in management processes is also required, along with greater technological development and a culture of ongoing improvement. It requires a decisive boost for e-commerce among companies in general, private individuals and public administrations, and which would be achieved largely by placing the focus on two major objectives:

 

Sending 100% of bills in electronic format

If practically 100% of invoices issued in Mexico are electronic, why are so many still printed on paper today? The paradox arises that a high percentage of these documents have to be printed out in order to reach their destination. The same technological solutions employed in the issue of CFDIs should also be prepared to receive them, thereby automating the delivery and integration of the invoices into management systems. On many occasions the problem is not so much technological as procedural, and calls for diverting the control systems based on workflows of authorizations around the document on paper towards parallel models based on electronic systems.

 

Integrating new electronic transactions

The invoice is a key document in business relations, but it is still just another and the final link in the chain.

Why not take advantage of the same technology used for issuing electronic invoices to manage purchase orders or dispatch advices in electronic format? Why not extend technology-based models such as EDI (Electronic Data Interchange)? The possibilities of keeping track of a bill with its corresponding purchase orders and delivery receipts would help to automate sending, reception and query processes and make them more efficient.

Building an electronic society is hard work, which in the case of Mexico already has a solid foundation thanks to e-invoicing. Continuing to taking steps to overcome the fiscal requirement of issuing invoices, and making it a real opportunity to make the Mexican economy even more competitive and efficient, is the big challenge that lies ahead both for public administrations and private initiatives.

This article is part of an analysis of electronic invoicing in Mexico, performed by the online magazine, The Paypers.

For the entire article, please send an email to editor@thepaypers.com to receive the E-invoicing Paypers, a premium-newsletter produced by The Paypers.

CFDI download portals are legal

Los portales de descarga de CFDI son legales

On 5 October, the Mexican Tax Administration Service   (SAT) announced a new non-binding criterion related with the Digital Tax Invoice via internet (CFDI). According to this ruling, it is improper to ask buyers to enter a particular website to get their receipt, since the seller is obliged to issue it directly.

The measure was published a few days later in Annex 3 of the 2014 Omnibus Ruling and, in these few weeks, has caused confusion among some taxpayers who usually employ this kind of solutions in their business. To avoid misunderstandings, the SAT has explained the text by publishing FAQs. One of them states that the invoice must be created on site if the customer requests it and provides the data to do so. When downloading the invoice later entails an advantage for the consumer, traders can continue using this type of portals.

The Mexican Association of Authorized Certification Providers (Amexipac) has also come out in favour of the measure. In an official communiqué, the organization states that the portals for issuing and downloading invoices “are legal and authorized to this end”. The EDICOM Tickets Portal falls into line with these solutions.

In other words, the new SAT criterion states that retailers must deliver the CFDI to their customers immediately upon request. Otherwise, they would be engaging in malpractice that may have consequences. As set forth by the SAT, breach of this duty can result in fines of up to 4,210.00 pesos for individuals and up to 69,000.00 pesos for businesses.

Virtual platforms, like the EDICOM Tickets Portal, thus function as an added value that simplifies the issuing of invoices at point of sale, for both the manager of the store and the customer. It also saves time for both parties, thus avoiding long queues forming.

e-Accounting now a reality in Mexico

Sistema de contabilidad electrónica en México

The new accounting requirement for Mexican companies calls for sending of electronic accounting records as of January 2015, and applies to all legal entities for those documents to be generated in the 2015 period, as well as documents generated and transmitted in the second half of 2014 ( July to December). The regulation is described in detail in the second resolution of amendments to the RMF and Appendix 24 thereof, whereby the SAT develops the new regulated electronic schema for the issuing of electronic documents or accounting reports.

 

Electronic accounting system challenges

Creation

Companies must generate three XML files corresponding to three types of accounting reports. These are:

  • Chart of accounts (single submission and each time a change occurs)
  • Trial balances and summaries (monthly submission)
  • Journal entries (monthly submission)

Construction of the XML file policies involves great complexity, as in order to maintain thorough control of the movements of companies this accounting file must include the UUIDs (universal unique identifier of invoices, aka “tax folios”) of all receipts issued and received by businesses, including invoices for travel expenses or payroll checks.

EDICOM Solution

Our data mapping technology allows us to automatically extract all data from your own accounting system and transform it into XML format. In addition, our system is able to extract the UUID codes for each receipt or invoice issued or received by companies for construction of the vouchers file.

Delivery

Once the messages are generated, the taxpayers must upload them to the Tax Mailbox . This is a private portal accessed with username and password through the SAT website.

EDICOM Solution

The EDICOM platform’s integration capacity allows us to reintegrate the XML files generated back into your own information or accounts management system, ready for delivery to the SAT.

Safekeeping

Under Article 34 of the Regulations of the Fiscal Code of the Federation, accounting files in their XML format must be preserved and stored as part of the accounting procedure, in compliance with the relevant official Mexican standards on generation and preservation of electronic records.

EDICOM Solution

The solution stores the XML files generated under high security conditions, with accessibility guaranteed, at the EDICOM Data Processing Centre. Likewise, all accounting documents follow the technological process associated with recordkeeping rule NOM -151, which certifies their origin and integrity against any future contingency.

Access official information provided by the SAT.

Integral quick start solution

This is a procedure which companies can outsource to an EDI (Electronic Data Interchange) service provider such as EDICOM, whose platform implements the necessary developments to generate the XML files and integrate them with each company’s own accounting system. This way, companies that have an EDI or electronic invoicing solution with EDICOM can roll out this new electronic accounting service quickly, which is a crucial asset, given the imminent requirement announced by the SAT.

 

E-billing growing exponentially in Mexico

CFDI MEXICO

Mexican taxpayers sent more than 2.4 billion electronic invoices in the first 6 months of the year. These figures from the Tax Administration Service (SAT) confirm the spread of Digital Invoicing via Internet (CFDI) scheduled for this year 2014. The main reason for this exponential growth is the implementation of legislative measures from the beginning of the year making it mandatory for physical and legal persons to use the so-called CFDI.

The study E-Invoicing/E-Billing: International Market Overview & Forecast published in February by Billentis consulting already highlighted Mexico as undisputed leader in e-billing worldwide. Indeed, this North American country showed the highest growth rates in 2013.

The figures presented now by the SAT, 2400 million electronic invoices, contrast with those of just a few years ago. For example, in 2011 Mexican taxpayers generated no more than 119 million electronic invoices. In fact, the number of CFDI sent in these first 6 months of 2014 already represents 21 % of all electronic invoices generated in the last 10 years, since this new system was rolled out in the country.

Mexico was one of the pioneers in the compulsory introduction of e-invoicing. With the 2nd Resolution of Amendments to the Omnibus Tax Ruling for 2013, the SAT announced that all taxpayers billing more than 250,000 pesos a year should migrate to CFDI before January 1, 2014, although a three-month extension was subsequently agreed.

Electronic invoicing has helped improve the fight against tax evasion in Mexico, but has also entailed a great number of benefits for taxpayers. With the automation of procedures and the use of electronic means to replace paper, Mexican companies have gained both in savings and productivity.

 

EDICOM, first PAC in Mexico

Edicom is the first PAC in Mexico authorized by the SAT. Our electronic invoicing solutions are designed to meet all legal requirements, while enabling users to take full advantage of the CFDI. In addition, we are endorsed by certificates such as ISO, SOX and NOM151 (electronic notary).

 

Mexico’s big hitters rely on Business Mail Payrolls

Business Mail Payrolls

From more than three months now, payroll issuance using the CFDI schema has been mandatory in Mexico. This is part of a technological modernization strategy making this North American country one of the most advanced in electronic management. The path towards limiting the use of paper is also marked by a considerable economic saving which, for payroll receipts, reaches 80% per document.

This information is taken from a survey carried out by EDICOM, showing how prior to rolling out CFDI, the payroll issuing and delivery process used to cost around 37 pesos each time for Mexican businesses. This sum mainly went on tasks such as printing, delivering and safekeeping of the pay check signed by the worker.

With the electronic process, however, these tasks have disappeared, and the whole procedure is currently done practically automatically through a solution such as Business Mail Payrolls. Through this platform, EDICOM generates, stamps and submits all the payroll receipts to the SAT. In addition, workers can sign documents electronically without leaving their post. All the pay checks are then stored in a secure high availability environment where both employees and employers can consult the documents at any time.

This is why major companies with a considerable number of workers, such as Eli Lilly, Pilgrim´s and Star Medica, UNILEVER, Robert Bosch, Volaris, Continental, BMW, McCormic, Prosegur, Fermic, Hanesbrands or Alucaps Mexicana trust and benefit from solutions such as Business Mail Payrolls to handle their administrative transactions and finally wave goodbye to paperwork. Thanks to this type of software, they can cut costs and boost employee productivity, as workers no longer have to line up during working hours to sign their pay checks.

 

New Tax Law amendments for 2014

The new amendments that came into force on July 1 were rolled out by the SAT specifically to govern the management of CFDI in certain economic and fiscal operations.

In addition, they highlight the new specifications for taxpayers who are required to keep an accounting record of their operations. They are now required to have electronic systems able to generate files in XML format containing a series of fields which include detailed data on their economic activities. Moreover, the accounts listing in the XML format specified must be sent by remote means to the Tax Mailbox on a regular basis (monthly, every time it is modified and at the end of each tax year).