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Transforming Mexico’s digital tax landscape

06/09/2017

​The deadline is imminent for the mandatory implementation of new Mexican CFDI reforms (version 3.3) caution Chair of Praxity’s Global Tax Working Group Rob Wagner, BKD LLP, and Latin America Vice Chair Raul Montemayor, Mazars Mexico. These major changes impact all Mexican companies, including multinational companies with operations in Mexico that export internationally.

Earlier this year the Mexican Tax Administration Service (SAT) issued new regulations regarding the use of digital tax documents (CFDI). Designed to simplify compliance and fight tax evasion, the new CFDI rules (version 3.3) will be enacted 1 December 2017. 

Preparation is vital to ensure compliance by the mandatory deadline, warn Rob Wagner and Raul Montemayor. Specifically, there are key changes to the structure, format, features and data catalogues, and validations, which impact Mexican entities and exporters in relation to:

Electronic invoicing

Recording payment receipts

Documentation of employee expense reimbursements.

Right now, Mexican invoicing and payroll systems companies are working around the clock to meet the 1 December 2017 deadline to ensure compliance with the new CFDI rules. The SAT is also providing regular updates and clarification on the new rules, as some aspects remain unclear. 

In light of these changes, Mazars Mexico and BKD are offering advice, training and assistance to clients of Praxity participant firms with operations in Mexico, to evaluate their compliance with the new CFDI rules and reporting obligations. 

Changes to electronic invoicing

Effective 1 December 2017, all taxpayers will be required to comply with the CFDI version 3.3 and the Complemento de Pagos. There are a number of new validations that taxpayers should use when billing customers and clients in Mexico and abroad. The additional challenges to the new 3.3 version is the list of more than 52,000 products and services taxpayers must apply on every invoice.

This means taxpayers must choose the exact description of the product or service from this extensive pre-defined list, along with the unit of measure that applies when selling to customers.

In addition, the Mexican tax authority now requests that a taxpayer includes six items of additional information on every invoice. This includes the type of document being issued, method of payment and the tax regime to which the taxpayer belongs, among others. 

The new rules also require that taxpayers follow specific procedures when cancelling a CFDI. It means a taxpayer will have to request an invoice cancellation by sending a request to its customer through the electronic tax mailbox (buzon tributario). Once received, the customer will only have three days to accept or reject the CFDI cancellation. If the taxpayer receives no reply after three days, it then can cancel the invoice. 

NEW CFDI for payment receipts

Also mandatory 1 December 2017, and another significant change, is the addition of a new CFDI:  the Payment Reception Complementary Receipt (PRCD). 

This electronic document must be issued for every payment received from customers in transactions collected after they issue the regular CFDI for the sale. 

Taxpayers will have 10 calendar days after month end to issue PRCDs for all payments received in the prior month. The regulation allows the taxpayer to issue one PRCD for each payment received from a particular customer, or one overall PRCD that details all payments received for a particular month from a specific customer. This type of CFDI cannot be cancelled but can be modified through another CFDI.

NEW payroll obligations for travel expenses 

In addition, Mexico’s payroll CFDI, which was introduced in January 2014, now has to include travel expense advances/reimbursements paid to employees. 

This reform encourages employers and employees to be disciplined in supporting these expenses with the right documentation. If not correctly applied, the new rules may result in additional taxable income for the employee and a non-deductible expense for the employer. Further clarification of these specific rules from SAT is pending, as this could negatively affect both the employee and employer.

Travel expenses reimbursed through corporate credit cards, where the employer pays the credit card company direct, may not need to be disclosed on the payroll CFDI of employees. However, this is still waiting confirmation from SAT. 

The new CFDI payroll complement (version 1.2) became mandatory on 1 April 2017. Employers failing to issue CFDIs for salary payments could, if detected, have the payroll expense disallowed by tax authorities. 

For more information, please contact Rob Wagner at rwagner@bkd.com and Raul Montemayor at raul.montemayor@mazars.com.mx

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