On 15 July 2013, the MTA announced that effective from 1 January 2014 the requirement to issue electronic invoices will be extended to entities with annual gross receipts of 250,000 Mexican pesos (MXN) per annum (approximately 19,700 US dollars (USD)) in place of the current threshold of MxN4 million per annum (approximately USD315,500). According to the announcement, taxpayers will be able to voluntarily opt to issue electronic invoices regardless of their revenue level.
The implementation of this development will imply a sort of ‘Universal obligation’ for the use of electronic invoicing by Mexican Taxpayers.
- From 1 January 2014, all taxpayers who use the current CFD scheme will be required to use the Internet Digital Tax Invoice scheme (CFDI) to issue electronic invoices, (the latter was launched in 2011).
- From 1 January 2014, all taxpayers with yearly turnover over MXN250,000 must use the CFDI electronic-invoicing scheme to issue their invoices. Only taxpayers with turnover below that threshold will be able to generate paper invoices.
It is important to highlight that, as in other countries in the LATAM region, the primary reasons for implementing electronic invoicing are not to promote efficiency and cost savings for enterprises but to combat tax fraud and give the Tax Authority more tools with which to monitor taxpayer activities. The strong tax regulation of electronic invoices is being reflected through the following characteristics.
Firstly, taxpayers must apply to the MTA for a digital stamp and apply their electronic signature on all electronic invoices issued. In addition, only a XML format promoted by the MTA is valid for generating electronic invoices. The process also implies that a pre-validation must be carried out by one of the authorized service providers listed on the MTA’s website. This website offers free invoicing services through the internet and lists the authorized service providers that may be used for electronic invoicing.
Secondly, the validation of incoming electronic invoices is critical as any validation problem automatically implies that the invoice is not valid for tax deduction purposes. Taxpayers receiving digital invoices (even when they appear on printed representation with ‘watermarks’) may verify their authenticity by checking the following on the MTA website.
- That the number used on the electronic invoice was assigned by the MTA to the issuer.
- The validity of the certificate for the digital stamp at the time of issuance of the electronic invoice.
Thirdly, taxpayers who issue and receive electronic invoices through the CFDI scheme should store them on magnetic, optical or other technology, in the electronic XML format.
Following the introduction of electronic invoicing in Mexico, taxpayers have seen many benefits in terms of safety and speed in the issuing of invoices, as well as a considerable reduction in costs, increased efficiencies, documentation of internal controls and technological processes, and a reduction in errors made during the invoicing process. However, the implementation of electronic invoicing has also required Mexican taxpayers to adhere to the strict tax regulations governing these procedures. These strict regulations have resulted in Mexico being on the list of ‘best practices’ for e-invoicing implementation around the world.
Many taxpayers will have to implement these new developments in the second half of 2013. Taxpayers need to avoid pitfalls when they select the in-house and external means necessary for successful implementation of the new electronic invoicing scheme (including selection of an authorized service provider) and in the management of their invoicing practices.