Mexico eInvoicing – Inbound Validation is Required

Scott Lewin
July 1, 2012

One of the top questions that comes up in virtually every Mexico e-Invoicing meeting is: Do I really need to do the inbound validation of invoices?

Many companies think that they don’t have to do the inbound validations; however, this oversight can lead to jail time and heavy fines.

The reality is that if you must validate inbound supplier invoices if you are using those invoices for the purposes of deductions of tax credits.

So it is not a technical enforcement that should be driving decisions. Instead, it should be a fiscal decision. In Mexico, you pay taxes to the government based on the net difference (i.e. the tax you charge your customers minus the tax that you pay your suppliers).

Value added tax collected from clients
-Value added tax paid to suppliers
= Payable IVA

If you are deducting these tax payments on your fiscal books, then not validating every single inbound invoice is just lighting the fuse of a “audit bomb” and then throwing acclerant onto the flame.

We have seen Mexico over the last 12 months move more towards the Brazil NFe model on the outbound invoices; whereby; the approvals are required prior to the truck leaving a warehouse. We also expect to see similar mandated legislations in a more formal technical design in coming months for inbound processing. However, this is not a plausible excuse to wait on the implementation of inbound validation. You should start this asap.

In Mexico with v.3.2, your suppliers must make the XML invoice available to you. This is traditionally done via e-mail. But many companies are looking at EDI communication as well as upload portals to simplify their process of collection. Once you have this XML, you can validate the signatures, certain values, and post returned validation signatures in your system of record. This will ensure, when/if you are ever audited, that all of the invoices and all of the tax deductions you are taking are from only valid and government approved invoices. The process is not difficult, but too many companies are putting their fiscal manager and controllers at risk of criminal penalties. These can all be avoided with a short 4-6 week project.  Make sure you understand the realities of both the technical requirements as well as the fiscal requirements — they are not separate issues anymore.

Sign up for Email Updates

Stay up to date with the latest tax and compliance updates that may impact your business.

Author

Scott Lewin

Gain timely insight and important up to the minute information about the current legislative changes in Latin America, including Brazil Nota Fiscal, Mexico CFDI, Argentina AFIP and Chile DTE. Learn how these changes affect your operations, your finances and also your Information Technology teams.
Share This Post

Sales & Use Tax United States
June 17, 2019
South Dakota v. Wayfair One Year Later – Retrospective and Look Ahead Webinar

Since the groundbreaking Supreme Court decision in South Dakota v. Wayfair last June, tax compliance requirements of sellers have undergone a seismic shift. In recent months, we have also witnessed a series of after-shocks directed at setting the foundation for U.S. sales tax compliance in the modern age. In a live webinar and Q&A, “South […]

United States
June 14, 2019
Sovos Again Named a Top Workplace Based on Employee Satisfaction

Earlier this week, the Star Tribune (Minneapolis, MN) released its annual list of Top Workplaces. The newspaper compiles this list based on employee satisfaction scores for companies across Minnesota. Sovos has once again been named to this list as a national standard setter of leading workplaces because of the actions we take to put employees […]

E-Invoicing Compliance EMEA
June 13, 2019
French VAT Fraud Prevention Package to Include a New Attempt to Mandate B2B E-invoicing

The French Minister of Public Accounts and Action, which has authority over all tax matters, has taken advantage of the process that is required to transpose the EU E-Commerce Directive to launch a number of initiatives to curb VAT fraud, including a renewed attempt to create a system of mandatory e-invoicing. Going from B2G to […]

EMEA IPT
June 13, 2019
Knowing When and How to Reclaim IPT

An insurer may need to reclaim insurance premium tax (IPT) from a tax authority for many reasons. These include a policy cancellation or mid-term adjustment, an administrative error or issuing a no claims bonus. In each case, it’s important to be aware of the issues involved ahead of any reclaim to ensure taxes are recovered […]

Sales & Use Tax United States
June 7, 2019
Marketplace Sales Tax Collection Rules and Current State of Affairs

Marketplace sales tax laws are being used by states as an additional means to collect more sales tax revenue from remote sellers on marketplaces like Amazon, eBay, Etsy, and WalMart. These online marketplaces and the rules being introduced to compel marketplace tax compliance have introduced new sales tax collection and remittance questions and complexity. According […]