Mexico Electronic Invoicing and Tax Reporting Requirements

Mexico Electronic Invoicing and Reporting Requirements

INVOICEWARE INTERNATIONALGlobal Compliance - Simplified

INVOICEWARE INTERNATIONAL © 2016

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Background

The Mexico SAT, their governmental tax agency, announced the mandatory transition of all invoices, for companies generating more than 250,000 pesos in revenue annually, to CFDI e-invoicing as of January 1, 2014. Organizations must comply with the CFDI legislation for all outgoing customer invoices, and validate all incoming supplier XML

Additionally, payroll (called Nomina Electronica) must be processed via CFDI

As of April 3rd 2015, Mexico requires electronic accounting

Chart of accounts

Trial Balances

Journal Entries


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Tax Authorities Control an End To End ProcessGovernment standardized XML linked to VAT Tax reporting = Real Time Audits

Supplier Registers XML

Government XML Standard Only Legal document Registers VAT Tax Obligation

PDF Accompanies Truck

Copy of Invoice OR Signed Shipping Document

depending on country

VAT Tax Linked to XML

Buyer only able to take VAT tax credits that are linked to approval codes in supplier XML

Errors or corrections are the buyer’s issue to get fixed


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Governments: Constantly Changing & AcceleratingFrom 3 to 10 Countries in less than 2 Years, More Business Processes Affected

2013 2014 2015-2016

AR eInvoicing

AR eInvoicing

AR eInvoicingAP eInvoicingFreight InvoicesSPED ECD

AR eInvoicingAP eInvoicingNominaeContabilidad

AR eInvoicingProforma VAT

AR eInvoicingAP eInvoicingFreight InvoicesSPED ECDSPED ECFeSocial

AR eInvoicingAP eInvoicingLibros Reports


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Solution RequirementsSimplify Complexity Today, Manage Change in the Future

Cash, Compliance & CostEfficiency & Stability

CFO

ObjectivesHow do I automate processes with

my customers and suppliers?

How do I streamline transparency of

reporting & cash flow?

Efficiency On-time delivery

Lower Inbound Receiving costs

Accurate tax reporting & IVA Credits

Complete audit trails

Cost Employee productivity

Cost and time of shutdowns

Tax penalties, missed deductions

Cost of closing books monthly

Flexibility Automated Contingency in place

Process workflows

Working capital optimization

SAP as single system of record

IT Consolidation

Chief Information Officer

How do I provide value with fewer

systems and lower costs of upgrades?

Effort build, integrate, and maintainSAP & multiple country solutions

Staff, Solutions, Infrastructure

Annual upgrades & consulting

Stable budgeting vs. fire drill projects

Buffer SAP from change

VP Supply Chain


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Multiple Solutions• Local country solutions

• Middleware interfaces

• SAP ERP updates

SAP not System of Record• Data is changed in 3rd party

tools not in SAP ERP

Who Supports?• Search & Rescue Missions

Who Maintains?• Alignment with SAP ERP –

global regression testing?

• Ongoing knowledge of what was done and what needs to be done

IT – Traditional Approach is CostlyMultiple Solutions, Constant Upgrades

SAP

ERP

Middleware

Integrate the

System

Different

Solutions for

Each Country

CUSTOMER

IDOC1

2

3

4

5

Monitor #1 Monitor #2 Monitor #3-6

Who

Supports

Who

Supports

Who

Supports

6

7

8


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IT – Financial Accuracy Equals Cash FlowVAT Remittances & Working Capital Issues

Working Capital Optimization• Accurate invoicing equates to lower DSO & less returns

• VAT tax obligations & deductions equal millions for multinationals

• Transform mandated compliance into Supply Chain Financing opportunities

Financial Reporting Accuracy - VAT

VAT obligations in Latin America – 16-22% of goods sold

Brazil VAT – based on physical movement of goods which means can owe even before you collect from your end customer

VAT Credits/Deductions must be linked to supplier’s registered XML

Finance Penalties – Local and FCPA for US Public Companies• Mexico - $3,000 per event (i.e. transaction) plus denial of deductions

• Brazil -75% to 150% of tax values - $50 Million dollar Chem business fined $3 Million by SEFAZ for deduction issues (page 30 of 10K)

• Foreign Corrupt Practices Act – SEC fines CPG company 4.2 Million of Mexico invoices issues; High Tech company FCPA issues approach $108 Million

http://www.sat.gob.mx/fichas_tematicas/buzon_tributario/Paginas/infracciones.aspx

http://www.economist.com/news/business/21569450-brazilian-firms-fight-huge-and-unpredictable-tax-bills-nothing-certain

http://www.kraton.com/products/pdf/2013annualrpt.pdf

http://blogs.wsj.com/corruption-currents/2011/02/10/tyson-foods-settles-fcpa-probe-agrees-to-pay-52-million/

http://www.justice.gov/opa/pr/hewlett-packard-russia-agrees-plead-guilty-foreign-bribery



Supply Chain – Business Impact is SubstantialMission Critical Timing & End User Productivity

Invoicing Can Shut Down Operations

Government approved documents are needed to ship legally. Built in back up processes ensure you can always ship.

Level 1 - On Network Contingency

Level 2 – On Premise Contingency

Automatic Reconciliation to get invoice registered when systems back on line

Standardization can drive down costs

Use XML Invoice and PDF on trucks to lower cost in inbound receiving

Automated Purchase Order – Invoice matching before the truck arrives

Eliminate data entry at warehouse by scanning the PDF for data entry

Manage discrepancies and trigger government processes (return orders, gov’t status messages)



Mexico SAT Requeirements

Account Receivable mandates - Sending Invoices to customers – these must be CFDI if your business does more than 250,000 pesos of revenue per fiscal year.

Account Payable mandates - Receiving invoices from suppliers – the government only cares about XML during an audit as of the 2012 diaries, so you must collect, validate and archive your supplier XML.

Logistics companies - should be producing the Carte Porta and this should accompany your goods movement in the country, customs documentation can be used for import.

Import numbers - known as Pedimento must be applied to the invoice.

Nomina Electronica – All payroll receipts must be validated before you can deduct taxes, this is retroactive and effective as of January 1, 2014.

eContabilidad (eAccounting Reports) – due for Chart of Accounts, Trial Balances and Journal Entries which need to be linked to government CFDI XML approval codes known as UUID.



Mexico e-Invoicing Business Process Overview

PDF or ML via Mil or electronically via FTP, email, etc.


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Invoiceware InternationalAvoiding Financial Penalties with Audit Proof Processes

Fiscal Compliance: XML Invoice collected and status updated inside of SAP

Process Automation: XML linked to a PO or processed along with SAP MIGO

UUID and Signing Attributes: UUID automatcially posted to SAP once validated with gov’t and all signing attributes for audit included in SAP monitor

5 Year Archive: Integrated archiving, so can access XML and PDF from SAP monitors

Revalidate XML: You should have abilit to revalidate XML as a supplier could cancel an XML days after first sending. This process ensures that time stamp and validation happens when XML received as well as when payed (could be days later)


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Mexico eContabilidad 2015

eContabiidad

April 3rd Deadlines for Chart of Accounts & Trial Balances

Polizas (Journal Entries) – Due September 2015 for July Movements

Due if audited

Due if require Tax Credit (Compensacion, Devolucion)

In order to do Polizas – must have XML automated through gov’t validation to G/L posting – 95% of companies are manual off PDF and not using XML in Payables process

Issues that many will have

Polizas – UUID (gov’t signing attribute) needs to accompany G/L entries for proof of tax credits and deductions

Inbound Procurement – typically invoices doesn’t have the UUID,needs to match and align to the FI posting in SAP

Gastos (T&E)– need multiple XML per expense report, often expensereport is a single entry on G/L with many to one link of XML for T&E

Nomina (Paychecks) – need to have UUID at grain of employee, usuallyG/L entry is at Cost Center


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Invoiceware InternationalBusiness-to-Government Compliance Suite for SAP

Latin America Regional Platform

• Brazil, Mexico, Chile, Argentina, Peru, Ecuador, Uruguay & Colombia

SAP System of Record

• SAP sole system of record

• Single user interface inside SAP

Process Automation

• Automated Contingency – always be able to ship

• Lower Inbound Receiving & AP Costs

• Transactions & Reports are fully integrated

• Working Capital Optimization solutions

End to End Support

• End to End support in Portuguese, Spanish and English whether SAP issue or gov’t issues

Fixed Fee - Change Management

• All maintenance is covered by fixed cost annual fee (software & labor included)



ResourcesClick the links below for more information

Learn more about Mexico requirements

Effective SAP Implementation in Mexico Is a Critical Component of Business-to-Government Compliance

Mexico SAT mandates checklist

Want to stay up to date on compliance in Latin America?Subscribe to our blog today.

http://www.invoicewareint.com/learn/requirements/electronic-invoicing-country-regulations/mexico-cfdi-factura-electronica

http://www.invoicewareint.com/blog/effective-sap-implementation-in-mexico-is-a-critical-component-of-business-to-government-compliance

http://www.invoicewareint.com/checklist-mexico-einvoicing-tax-reporting-requirements

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Next Steps Contact Us To Learn More

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Mexico Electronic Invoicing and Tax Reporting Requirements