Electronic invoicing in Mexico
Mexico has one of the most complex electronic invoicing systems in Latin America. Its scheme, Comprobante Fiscal Digital por Internet (or simply CFDI), was implemented in 2011 as a replacement for the CFD.
Resources such as this overview, carefully detailing the components of the mandate that taxpayers need to consider for compliance, simplify the country’s complex e-invoicing scheme. Be sure to bookmark this page to stay on top of any regulatory changes over time.
Table of contents
1. How does e-invoicing work in Mexico?
2. Characteristics of electronic invoicing in Mexico
3. Types of vouchers in Mexico
4. Format of electronic invoices and documents in Mexico
7. Timeline of e-invoicing adoption in Mexico
8. Penalties: What happens if I don’t comply with e-invoicing in Mexico?
9. What else do I need for VAT compliance in Mexico?
There is a rigorous set of processes that taxpayers must follow when invoicing electronically in Mexico.
- The generated XML file must comply, both in terms of format and syntax, with the specifications of the Miscellaneous Tax Resolution in force.
- The document must pass the validation rules established for both its content and the format of the XML file generated.
It’s mandatory that all electronic documents, including e-invoices, are sent to the PCCFDI (or to the SAT in exceptions) for validation. The invoice must include specific information, as detailed further down the page, to be considered legally valid.
Mexican invoicing law does not require the recipient to confirm it has received the e-invoice, though they must securely store the documents for five years from the time the corresponding tax return was filed.
Characteristics of electronic invoicing in Mexico
Mexico B2B e-invoicing
Mexico has mandated the issuance of electronic invoices between businesses since 2014, though it had voluntary schemes and conditional requirements for specific taxpayers prior to that year.
Organisations must meet set rules and requirements when participating in the country’s e-invoicing scheme.
Mexico B2G e-invoicing
As well as with B2B transactions, Mexico requires businesses to issue electronic invoices when transacting with governmental and public administration bodies.
The process remains the same, and the aforementioned rules apply – failure to meet the specifications of Mexico’s e-invoicing regulations may result in penalties.
Types of vouchers in Mexico
Mexico’s electronic invoice system contains multiple types of vouchers. Among the main ones are:
Income receipt
Issued mainly in sales transactions for which some income is received in cash, check or any other form. Generally, it is for sales of goods and services, including foreign trade operations, but also for donations and income for professional services.
Proof of expenditure
Issued in cases where the company pays or returns money due to refunds, bonuses, discounts or correction of an income voucher. These are equivalent to credit notes.
Transfer certificate
Used to justify the legitimate possession or holding of the goods that must be transferred within the national territory. These CFDI are used as a transportation contract when a company provides transportation of goods to the owner of the goods.
Certificate of payment receipts
Issued whenever a payment is received on a date other than that on which the transaction is made and the CFDI is generated. Their main function is to document a total or partial payment collection.
Withholding and payment information certificates
Used to report on tax withholdings applied at the time of making payments for which a withholding certificate must be issued. This type of certificate also applies when withholdings are made for payments abroad, royalties, sale of shares, dividends or distributed profits, among others.
CFDI Supplements
In addition to the types of invoices or CFDIs mentioned above, Mexican tax legislation requires that when certain transactions are carried out, additional information must be provided specifying the type of transaction in question. This type of additional information is contained in so-called “complementos”, which are attached to the original CFDI. There are more than 20 “complementos”.
In other cases, the requirement to issue a supplement to the CFDI is due to withholdings made at the time of making payments for specific transactions. These supplements are the following:
- Derivative transactions
- Disposal of shares
- Dividends
- Financial sector
- Interests
- Leasing
- Mortgage interest
- Non-business trusts
- Payments to foreigners
- Prizes
- Retirement plans
- Technology platforms
Format of electronic invoices and documents in Mexico
Mexico has a series of unconditional elements that digital documents like e-invoices must include. These features are established in the country’s Tax Code (Código Fiscal), the current Miscellaneous Tax Resolution (Resolución Miscelánea Fiscal, RMF) and its Annexes.
Some of the essential components of income CFDIs include:
- Header
- Item detail
- Form and method of payment
- Value consigned
- Discounts and surcharges
- Informative subtotals
- Type of payment made
- Taxes
- Related CFDIs
- SAT digital stamp
- Signature with a valid advanced electronic signature certificate
What is the CFDI?
CFDI, which stands for Comprobantes Fiscal Digital por Internet, is an e-invoice format mandated by Mexico’s tax authorities. It is also used in select countries across Latin America.
CFDI is effectively an electronic invoice, often also referred to as a digital tax receipt. It provides all necessary details of a transaction, including goods or services provided, associated costs and subsequent taxes.
Mexico’s tax administrative service, SAT (Servicio de Administración Tributaria), approves and certifies these electronic invoices – deeming them legally valid.
The most recent version of CFDI in Mexico is 4.0, which has updated major features of the document. This includes the new requirement to include the sender and receiver’s names, additional fields for exported goods, and a section explaining the reason for a documentation cancellation.
Cancellation of CFDIs
Electronic invoices, or CFDIs, can indeed be cancelled in Mexico. However, with the introduction of CFDI 4.0, the cancellation must be adequately justified and documented, including one of the designated service response codes.
An e-invoice can only be cancelled within the year it was issued – after that, it is impossible to do so. However, each year, the Miscellaneous Tax Resolution establishes the ability to cancel no later than the month in which the annual Income Tax return corresponding to the year in which the receipt was issued must be filed.
Timeline of e-invoicing in Mexico
Mexico’s journey towards electronic invoicing becoming commonplace may have started in the early 2000s, but its e-invoicing scheme is still developing to this day.
- 2004: Mexico introduces the e-invoice
- 2010: E-invoicing to tax authorities became mandatory for suppliers with annual turnover exceeding MXN $4,000,000
- April 2014: E-invoicing became mandatory for all taxpayers
- 2017: All domestic businesses and VAT-registered entrepreneurs must send e-invoices to the SAT within 72 hours
- 1 July 2023: Taxpayers must use version 4.0 of CFDI e-invoicing system
Penalties: What happens if I don’t comply with e-invoicing in Mexico?
Failing to meet the requirements of Mexico’s electronic invoicing requirements could lead to penalties.
Taxpayers can expect to receive a fine of:
- MXN $400.00 – $600.00 for each CFDI issued that is missing the necessary supplements
- MXN $880.00 – $17,030.00 for not issuing documentation for the transportation of goods
- MXN $19,700.00 – $112,650.00 for not issuing or delivering the CFDI for their activities or issuing them without meeting the requirements; not delivering or not making available the printed representation of the CFDI when this is requested by its clients; not issuing the CFDI that covers the operations carried out with the general public; not making them available to the tax authorities when required
- MXN $19,050.00 – $108,880.00 for issuing a CFDI that includes the incorrect tax identification number for the buyer. In the case of a repeat offence, the penalty will consist of the preventive closure of the taxpayer’s establishment for a period of three to 15 days.
In certain cases of recidivism, the Tax Code establishes that the SAT can sanction offenders with the closure of the establishment from where such infractions are committed. Mexican legislation also includes the possible commission of equated tax fraud and smuggling crimes if the provisions regulating CFDI and their complements are not duly observed.
What else do I need for VAT compliance in Mexico?
For taxpayers in Mexico, there are more obligations than just e-invoicing. Tax compliance requires a lot of care and attention, especially for multinational organisations, and it can take up significant internal resources.
FAQ
Is e-invoicing mandatory in Mexico?
E-invoicing has been mandatory for all taxpayers in Mexico since April 2014.
Who needs electronic invoicing in Mexico?
Every taxpayer established in Mexico must issue and receive electronic invoices. This has been enforced since April 2014.
Can an electronic invoice be cancelled?
Yes, issuers can cancel electronic invoices they have sent to buyers, but there is a time limit on this. The cancellation process has undergone significant updates over the years, but it is still possible.
How much time is there to cancel electronic invoices in Mexico?
Once buyers receive a notice from the seller, they have 72 hours to accept or reject an e-invoice cancellation. If the buyer does not respond, the electronic invoice will be cancelled.
By default, the recipient of an invoice must accept its cancellation for it to be admissible; however, according to Rule 2.7.1.35 of the Miscellaneous Tax Resolution, there are 12 cases in which accepting the counterparty is unnecessary.
What information should be included in an electronic invoice in Mexico?
There is a lot of compulsory information that must be included in an e-invoice in Mexico, including:
- Tax identification number
- Buyer name and address
- Seller name and address
- Folio number
- Total invoice amount
- Type of transaction
Failing to include all required information may result in the SAT issuing penalties.
Is the use of the CFDI 4.0 scheme mandatory?
The use of Mexico’s CFDI 4.0 e-invoicing system has been mandatory since 1 July 2023.
What are the main differences between CFDI 3.3 and CFDI 4.0?
CDFI 4.0 delivered several significant changes to 3.3, including:
- Changes to the cancellation process for CFDIs
- The requirement for the fiscal address of both parties
- A new format for the Retention Receipt and Payment Information
What kind of receipts can I generate with Sovos?
Sovos ensures full compliance with all e-invoicing requirements in Mexico. We are a PAC authorised by the SAT, offering a comprehensive solution to resolve your indirect tax needs, and we support all CFDIs and their complements.
Setting up e-invoicing in Mexico with Sovos
With electronic invoicing becoming more common globally, following the lead of Latin American countries like Mexico, it is important that you prioritise compliance.
The global – yet fragmented – adoption of e-invoicing solidifies the need to choose a single vendor for complete compliance, wherever you do business. Sovos is a tax compliance partner you can trust.
Focus on what truly matters: speak with a member of our team today to begin reclaiming your time.
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