I was on the phone with two Fortune 500 companies yesterday to discuss Latin America electronic invoicing. The conversations were similar to many I’ve had over the last few months, they had taken no steps toward implementing Mexico CFDI invoicing either on the outbound side nor on the inbound supplier side and were now in panic mode. Their local team had told them it was not a big deal. But once they started understanding the requirements, the impact to their ERP, and the frequency of changes to the legislation, they realized it was a big deal. A very big deal. But today I want to focus on the discussions we are having with the accounts payable teams, as the inbound Buyer side requirements in Mexico are often overlooked.
They are overlooked for three reasons:
- They don’t think the mandates exist for AP validation
- Their suppliers are still sending paper today.
- They just don’t think the mandates are real because the government has not had a history of enforcing CFDI.
Let’s address each one of these one by one:
- The mandates for inbound XML were not issued in May 2013. They were actually issued in the diaries from the Mexico SAT on December 28, 2012.
- “For the purposes of articles 28thand 30thof the CFF,taxpayers who issue and receive CFDI, must store them on magnetic, optical or any other technologyin their xml format”
- Article 30thof the CFF among other things specifies that bookkeeping related documentation (including CFDI) must bestore for a period of 5 years.
- As for supplier’s sending paper still, this is because they can. Remember, that the cut over to CFDI XML is not until January 1, 2014. This means that 90% of your suppliers could still be operating on legacy environments. CBB was a special paper format for small suppliers, and CFD which is the dominate process used by the overwhelming majority of large companies still to this date and time — doesn’t have the XML mandates on the buyer.
- Tax reform is part of the newly elected President’s agenda across the board. His government seeks to raise total tax revenues by nearly 3 percent of economic output by 2018. This is serious and is moving the direction of Brazil. The tax overhaul is a part of a series of reforms that Pena Nieto, President of Mexico, hopes will strengthen the economy and boost growth rates that have lagged behind other major emerging markets. With tax increases a major priority, expect the “teeth” of the legislation to show itself more and more. For example, on the outbound sending side, many companies still think that they don’t have to include the CFDI with the truck. I suggest you speak with companies that are already finding their trucks impounded for 4-5 days and requiring steep penalties for their release. This legislation is real and here to stay.
Make sure you address the needs on the outbound account receivable side as well as the account payable side – they affect your ability to deduct your taxes, expose you to local penalties, and expose you to FCPA (Foreign Corrupt Practices Act) accounting provision issues if not managed correctly.
