Electronic Invoicing in Mexico is now mandatory, effective immediately

On January 1, 2011, Mexico began requiring companies to integrate with the Mexico Tax Authority (SAT) for real-time issuance and approval of electronic invoices.

However, as from now all invoices in Mexico must be electronic for companies with an annual income of 4 million Pesos, US $325.000, EUR 300.000. Soon all Mexican companies must follow the new e-invoicing rules.

So companies operating in Mexico need to be aware that invoices and the way they are presented can have an effect on their business in Mexico, particularly with the Mexican tax authorities.

Changes in Mexican Electronic Invoicing Legislation

Until now, Mexican companies only had to concern themselves with paper invoices. Even so these paper invoices are subject to rules on where and by whom they can be printed. Can you imagine that?

Under the new rules:

• the electronic invoice in Mexico is a digital tax receipt called a “Comprobante Fiscal Digital” (CFDI) or “factura electrónica”.
• This digital tax receipt documents and confirms that a business transaction is in accordance with the standards defined by the Mexican Tax legislation (For the experts: Annex 20 of the Miscellaneous Tax Resolution).
• And it must be generated, transmitted and protected by electronic means.
• Companies issuing electronic invoices must keep track of the invoices issued, by storage or backup of digital vouchers, so as to have on hand any clarification required by SAT in the future.
• Paper invoices printed before January 1, 2011, by an authorized printer may continue to be used until the expiration date established on the invoice (normally two years).
• Where required, new paper invoices need to be bar-coded (Código de Barras Bidimensional or CBB).

Background on the “Comprobante Fiscal Digital” (CFDI)

There are multiple purposes and benefits of the new electronic invoicing.

1. To achieve savings in the cost of issuing factura by eliminating the requirement to have them printed on special stationary (letter head) only by certain licensed printers.
2. The electronic invoicing process also will streamline administration, including shipping and receiving.
3. It is also anticipated that the electronic invoices will help reduce the risk of fraud since the documents will be subject to certain security measures (discussed below).
4. The new approach on electronic invoices also establishes a means to immediately verify the identity and tax eligibility of the person signing the electronic invoice.

Getting started with the new Mexican e-invoicing system

In order to be able to issue electronic invoices under the new Mexican electronic invoicing law, each Mexican company must take these steps:

• Obtain a federal registration for taxpayers (Registro Federal de Contribuyentes or RFC) and register with SAT to issue electronic invoices.
• Obtain an Electronic Signature (Firma Electrónica Avanzada or FIEL) from SAT.
• Obtain a Certificate of Digital Stamp (Certificado de Sello Digital or CSD) from SAT.
• Use an Authorized Certification Provider (Proveedor Autorizado de Certificación or PAC) for the validation, folio and digital stamp.

Sanctions

Not complying with the new electronic invoicing regulations is the same as tax fraud. That means that issuing or using electronic invoices that do not comply with the new regulations can lead to imprisonment from six months to 9 years depending on the amount involved.

However as this is a financial felony, most of the times the sentence will be transitioned into paying a financial penalty.