In 2004, companies in Mexico started using the electronic invoice. In the beginning, it was an alternative method for large companies that wanted more efficient processes, but later, in 2010, the tax authority in Mexico (SAT), made it mandatory for companies with over 4,000,000 pesos of annual income.
In 2014, generating an electronic invoice was mandatory for all taxpayers. Now, SAT receives all purchase/sales information less than 72 hours after its creation.
What is an Electronic Invoice (CFDI)?
Also known as ‘Comprobante Fiscal Digital por Internet (CFDI),’ an electronic invoice is an electronic document that details the services or goods, their cost and taxes, and subtotals and total. Thus, the electronic invoice (CFDI) is the digital version of invoices that were previously made on paper.
Each electronic invoice has two files – an XML file, which has validations and stamps but is difficult to read, and a PDF file that’s the graphic representation of the XML file. Each taxpayer has an electronic signature (FIEL) he uses on the XML file to sign the document and prove he’s the one issuing the CFDI.
Each CFDI issued by a taxpayer is sent to a third party (PAC) that makes sure the information and structure are correct and puts an electronic stamp on the XML file, which ensures the XML won’t be modified after the PAC has approved it.
Who Should Issue Electronic Invoices?
All entities (Moral or Fisica) who have an income from their economic activity are required to issue an electronic invoice. In Mexico, the electronic invoice is the only fiscal document recognized by the SAT, so it’s obligatory for those who carry out economic activities, receive an income, and make a withholding or payroll.
Requirements for Electronic Invoice
The requirements established by SAT for a company to issue electronic invoices are as follows:
- Be active in SAT as a “Moral” or “Fisica” entity
- Get a Firma Electronica Avanzada (FIEL)
- Have the Certificado de Sello Digital.
- Hire a third party (PAC) to stamp your invoices
How to do an Electronic Invoice
Regardless of the system used to generate a CFDI, this is done in two simple steps:
- The provider generates the electronic invoice with the buyer’s data as he did in its paper version and automatically places his signature and an electronic certificate to send it to the PAC. If the invoice structure is correct, the PAC returns the invoice with the stamps. This can be done in seconds.
- With the XML file, the ERP system creates the PDF version so the provider sends the invoice in XML format to the customer along with the PDF version.
The graphical form of CFDI (PDF) is variable – every company has their own needs regarding the information requirements from their customers. You can have Addendas and/or Complementos, which allow you to include additional information, like a PO number or a bank reference.
But there are five elements that cannot be missing in a CFDI for its validation.
- Folio Fiscal or UUID (Identificador Unico Universal)
- Date the invoice was stamped
- Comprobante fiscal digital stamp
- SAT certificate
- SAT seal
Benefits of Electronic Invoice
Electronic invoices simplify the invoice process, reduce administrative costs, and benefit taxpayers in several ways, including:
- Improving invoice validation process
- Growing up the use of ERP systems
- Improving estimated time to receive invoices
- Increasing ability to process account receivables
- Reducing the number of fake invoices
New changes CFDI 3.3
In 2016, SAT released new requirements for the CFDI, which they called CFDI version 3.3. This new version improves the use of master files for some information like zip codes, items and services, cities, etc. Migration to the new version began July 1, 2017, although taxpayers will have until December 1, 2017 to comply with the new requirement.
To learn more about CFDI structure, you can visit the SAT website and search for “electronic invoicing” or “factura elecrónica”; all the detailed specs for it are compiled on Anex 20.
For other questions about Mexican tax law and electronic invoices can help you sort it out, contact us today.