18 September 2014

Latin American E-Invoicing

Steve Sprague - Invoiceware International

71 | posts 164,377 | views 0 | comments

Electronic invoicing

A discussion and guidance on the path to full scale adoption of electronic invoicing by corporates, goverments, SME's and consumers, creating savings up to € 60 billion in 2020. With a focus on: trends, business models, processes, technology, and legal issues.

Mexico tax authority mandates e-accounting records

07 August 2014  |  1350 views  |  1

Let the audits begin.  I have always stated that the sole reason for a government to mandate electronic invoicing across the business community is to reduce tax evasion.  As in other Latin America countries, the transactional signing of standardized XML is always implemented with a corresponding reporting element. Brazil has Nota Fiscal and SPED. Chile has DTE and Libros. And now Mexico has CFDI and electronic books.

Fines are real and they are happening. The forcing of these reports will only put a larger focus on fines and penalties.

Six figure penalties are currently being imposed on organizations – why – they did not take the archiving and validation seriously on the inbound Account Payable validation process. One company is paying almost $90,000 dollars in fines because they were audited, and they could not provide the proper documentation to substantiate their VAT deductions.  Another organization stated – we had the XML, but the stamp was not within the 72 hour rule of generation and the government did not recognize the invoice as valid. Therefore, they would not allow the VAT deductions. In a third case, the company had the XML and used it for deduction purposes, but the supplier had filed a cancellation with the SAT – and the XML updates were not applied to the buyers systems. 

Take Away – you need to automate the XML processing through your accounting system, not just collect it and store it. 

Most companies focused on implementing outbound CFDI and are doing the inbound validations manually. However, when you consider that the CFDI has gaps (i.e. PO Number) and other information that is used to ensure the retention tax is correct, you better be sure you have a solid process in place. When 4 XML can cost you $100,000 dollars, what do you think the fine will be on your invoice volume.

Below are the basics of the law:

On 4 July 2014, Mexican tax authorities published in the Federal Official Gazette the Second Amendment to the Temporary Tax Regulations, which contains the tax reporting requirements for accounting information. Under these rules, the requirement to file accounting information monthly with tax authorities is effective beginning July 2014.

According to PwC, Taxpayers must maintain accounting records through electronic systems that can create XML format files, which include the following:

1. Chart of accounts used during the period. The chart of accounts must include a field to include account groupings, as defined by the tax authorities in Annex 24 of the Temporary Regulations.

2. Trial balance, with initial balances, movement for the period and final balances for each of the accounts of the taxpayer, including assets, liabilities, equity and results of operations (revenue, costs and expenses). For final year-end balances, information on recorded tax adjustments should be included.

The tax accounts should be identified along with, when applicable, the different rates, quotas and activities for which no tax is due, as well as transferred taxes and creditable taxes. Guidance for these accounts is provided in Annex 24 of the Temporary Regulations.

3. Information related to journal entries in the accounting records. This should include details for each transaction, such as account, subaccount, sub-ledger and information related to electronic invoices, as well as identifies the different tax rates, quotas and activities for which no tax is due.

 

http://www.ey.com/GL/en/Services/Tax/International-Tax/Alert--Mexican-tax-authorities-issue-rules-for-electronically-filing-accounting-records

 

 

TagsRisk & regulation

Comments: (1)

Tom Sohal - Triumph Motorcycles - London | 14 August, 2014, 14:17

A very useful summary, thanks for sharing clarity in this complex and evolving topic

Comment on this story (membership required)
Log in to receive notifications when someone posts a comment

Latest posts from Steve

Supply chain finance takes hold in Latin America

09 September 2014  |  1176 views  |  1  |  Recommends 0 TagsTransaction bankingGroupElectronic invoicing

Cloud computing market in Latin America expanding

08 September 2014  |  529 views  |  0  |  Recommends 0 TagsInnovationGroupElectronic invoicing

Brazil replaces U.S. as major food trade partner with Russia

04 September 2014  |  2085 views  |  0  |  Recommends 0

Mexico's e-invoicing system paying off for government

04 September 2014  |  1225 views  |  0  |  Recommends 0 TagsRisk & regulationGroupElectronic invoicing

Latin American countries dominate retail growth

27 August 2014  |  915 views  |  0  |  Recommends 0 GroupElectronic invoicing
name

Steve Sprague

job title

VP Product Strategy

company name

Invoiceware International

member since

2012

location

Marietta

Summary profile See full profile »
Steve Sprague has been working in the electronic invoicing and middleware integration space for o...

Steve's expertise

What Steve reads
Steve writes about

Who is commenting on Steve's posts

Chris Principe
Tom Sohal