Invoicing and Tax regulation in Mexico
Invoicing Regulation in Mexico
Mexico has strict invoicing regulations that must be adhered to by all businesses. All companies, regardless of size or industry sector, are obligated to create and provide electronic invoices (known as CFDI) for all transactions. These electronic invoices must be validated by one of the authorized certification providers (PAC) in Mexico. Non-compliance can result in significant penalties.
Real-Time Reporting / Fiscalization in Mexico
Mexico also enforces real-time reporting and fiscalization measures. By law, each CFDI must be reported to Mexico's tax authority (SAT) in real time through a PAC. Failure to promptly report invoices can lead to penalties. It's vital that businesses ensure they have suitable systems in place to meet these requirements.
E-Invoicing in Mexico
E-invoicing is mandatory and highly regulated in Mexico. Known as CFDI (Comprobante Fiscal Digital por Internet), e-invoices are required for all transactions, including sales, purchases and payroll. Businesses must use a PAC to validate the invoices, showing that the transaction was completed and the report submitted to SAT in real time.
VAT/GST/Tax Compliance in Mexico
Mexico has a Value Added Tax (VAT) system known as IVA. The standard tax rate is 16%, with a 0% rate applicable to certain essential goods. Both b2b and b2c transactions are subject to this tax, and companies are required to charge IVA on their sales and can deduct the tax paid on their purchases. Businesses are required to file monthly VAT returns. In b2g transactions, electronic invoices must be generated and reported as above, and departments must withhold and report the taxes. Compliance with these VAT regulations is mandatory in Mexico.