Update: 28 March 2023 by Maria del Carmen

Grace Period to Transition to Mexico’s CFDI 4.0 Ends

On Friday 31 March 2023 the grace period granted by Mexico’s Tax Administration Service (SAT) in the Miscellaneous Tax Resolution 2023 (RMF) ends. Taxpayers must transition to version 4.0 of CFDI, Comprobante Fiscal Digital por Internet, the electronic billing schema.

Document formats that will no longer be accepted following the end of the grace period include:

What does this CFDI transition entail?

Authorized CFDI Certification Service Providers (PSCCFDI) must update their integration mechanisms to remain compliant with the new CFDI 4.0. Taxpayers must align their technologies with the changes that their PSCCFDI notifies.

What happens if taxpayers don’t migrate to CFDI 4.0?

The authority has the power to impose fines for non-compliance with the new CFDI tax provisions, when executing verification powers or within are fund application process.

These fines range from $ 19,700.00MXN ($ 1000.00 USD approx.) to $ 112,650.00MXN ($ 5500.00 USD approx). Repeated non-compliance can result in the tax authority preventively closing the taxpayer’s  establishment for a period of three to fifteen days.

Fines of $ 400.00MXN ($ 20.00 USD approx) to $ 600.00MXN ($ 30.00 USD approx) will be issued for tax receipts that don’t include the relevant supplements as outlined in the SAT’s guidelines.

In extreme cases where damage to the federal treasury is proven, this is considered comparable to tax fraud. This would involve when CFDI is used for taxes calculation with non-compliance requirements of Articles 29 and 29-A of the Federal Tax Code.

CFDI V 4.0 guidance

The CFDI Version 4.0 became the only way to invoice, the tax authority has updated the following documents ahead of CFDI v4.0 transition:

Companies will need to be mindful of these changes and how to implement them to ensure ongoing compliance during the transition to CFDI 4.0.

Need to discuss compliance with Mexico’s e-invoicing requirements? Speak to our experts.

 

Update: 1 February 2023 by Maria del Carmen

What is CFDI?

CFDI, which stands for Comprobante Fiscal Digital por Internet, is the electronic billing schema defined by the Mexican federal tax code. It has been mandatory for companies that do business in Mexico since 2011.

CFDI aims to increase visibility into companies’ tax liabilities so the government can ensure it is receiving accurate payments. It has been successful, with audits based on the legislation revealing a 34% increase in VAT collected in a single quarter.

Tax legislation in Mexico requires additional information when companies make certain transactions. Named “complementos” or supplements, the additional information must be attached to the main CFDI.

There are 30 main CFDI ‘complementos’, each with its own essential components and requirements. There is also a validation process and cancellation process to follow and a wide range of penalties for non-compliance.

Read our Mexico e-invoicing guide to learn more and ensure compliance with this complex VAT landscape.

Updates to CFDI for 2023

On 27 December 2022, the Mexican Tax Administration Service (SAT) published the Resolution Miscellanea Fiscal (RMF) 2023. Each annual revision sets outs rules and adjustments for CFDI, a key component of Mexico’s electronic invoicing system.

The RMF entered into force on 1 January 2023.

The transition between CFDI V3.3 and V.4

Among the most important rules is the extension of the grace period for issuing certain documents. Now extended to 31 March 2023, the provision covers the following documents:

Cancellations and corrections of CFDI

The RMF 2023 states cancellations of the CFDI cannot be made later than the month in which the annual declaration of the ISR (tax on income) must be submitted. That’s in April for individuals, and in March for companies.

The resolution also states that corrections to the payroll payment CFDI (CFDI de nómina) can only be made once and no later than 28 February 2023.

Hydrocarbons and petroleum

Taxpayers that carry out volumetric controls of hydrocarbons and petroleum products may continue to issue a daily, weekly, or monthly CFDI for all operations carried out with the public, until 31 December 2023.

Including supplement “Hidrocarburos y Petroliferos” in the CFDI will become mandatory 30 days after the SAT publishes the complement on its website.

Carta Porte Supplement

The RMF states until 31 July 2023 no fines will be imposed and it will not be considered under the crime of smuggling if the Carta Porte supplement does not have all the requirements indicated in the CFDI Filing Guide.

To prove the transport of goods or merchandise, the intermediary or transport agents must now issue the CFDI type income (CFDI tipo ingreso) with the Carta Porte Supplement – instead of the CFDI type Traslado.

Taxpayers involved in the motor transport of dedicated services are subject to additional rules. Those who provide the service to a single client or contractor through the specific assignment of vehicle units may issue the CFDI type income (CFDI ingreso) to cover the entire service provided without the Carta Porte Supplement.

In these instances, the client or contracting party must issue the CFDI of transport (CFDI de transporte). This includes the Carta Porte supplement for each trip, which must be related to the CFDI type income (CFDI ingreso) issued by its carrier.

Additional regulations are established regarding the issuance of CFDIs related to bareboat charter services, for a specific time, per trip, and ferry modality.

Resource Identification Supplement

The RMF includes information about the Resource Identification Supplement and Expense Bill of Third Parties provision, this will become mandatory 30 days after the tax authority publishes it on its website.

For further questions don’t hesitate and get in touch with our experts today.

Brown Forman embraces changing e-invoicing regulations with Sovos

case study

Brown Forman

The Sovos e-invoicing compliance solution allowed Brown-Forman to ease the burden of compliance from its IT team.

Summary

Business Challenges

  • Growth strategy hindered by complex regulations

  • Real-time processes and responses required by mandates impacting business operations

  • Limited IT resources to monitor and implement requirements

Solution

Brown Forman selected Sovos’ Business to Government regional reporting platform for:

  • Brazil Nota Fiscal
  • Mexico CFDI
  • Mexico eContabilidad

Benefits

  • Seamless integration with SA

  • Constant monitoring and support has resulted in zero business disruptions

  • Ability to redeploy resources to core business functions

  • Need for ongoing SAP upgrades and IT burdens eliminated

The Company

Brown-Forman is one of the ten largest spirits companies in the world, distributing products in more than 160 countries. Based in Louisville, Kentucky with offices across the globe, Brown-Forman manufactures iconic brands such as Jack Daniels, Southern Comfort and Woodford Reserve.

The Challenge

International expansion has been integral to Brown-Forman’s success, but this growth strategy placed a great demand on its IT team. The company’s SAP systems needed to comply with the constantly changing financial legislation around the world, and e-invoicing mandates threatened to exceed the Brown-Forman IT team’s bandwidth. This was especially a concern in Brazil and Mexico, where the company operates nine facilities and regulations change frequently.

Demanding real-time processes and responses, any e-invoicing oversight in these countries would affect both the finance and supply chain teams, and could significantly impact business operations. 

The Solution

With limited in-house IT resources to monitor and implement each country’s fiscal requirements, Brown-Forman needed a solution that would help it adapt to the ever-changing Latin American landscape and also integrate into its single global instance of SAP ERP.

Given the extensive scope of its operations in Latin America, Brown-Forman realised that it needed a specific subject matter expert. In addition, the company required a predictable cost structure during its heavy expansion.

“Because Sovos provides the network upgrades as well as the SAP ERP configurations, we have been able to work with one vendor across multiple countries and confidently manage the changes to Brazil’s Nota Fiscal and Mexico CFDI’s legislation.”

Randy Isdahl

Director, SAP Process Architecture at Brown-Forman

The Benefits

Sovos provides Brown-Forman with constant monitoring and support, ensuring no compliance-related business disruptions. Plus, the Sovos solution seamlessly integrated within Brown-Forman’s existing systems, allowing the company to manage multi-country compliance directly within its internal SAP system.

The Results

With Sovos e-invoicing compliance in place, Brown-Forman was able to redeploy resources to core business functions, including account receivables and account payables, and focus on supply chain and logistics enhancements. In addition, the partnership has eliminated the ongoing SAP upgrades and IT burdens caused by the constantly changing e-invoicing regulations.

Why Sovos?

Brown-Forman selected the Sovos eInvoice and eAccounting regional solutions to simplify its compliance efforts in Brazil and Mexico. The company sought a solution that could help it cut down on human resource capital and technology investments, and Sovos’ SaaS platform allowed it to accomplish that goal.

Ensure your business is compliant with e-invoicing obligations.

Sovos provides the global expertise you need to manage regulatory requirements across all borders.
Talk with an expert today