Briefing Document: Electronic Invoicing and Real-Time Reporting in Mexico (CFDI)

This briefing document summarises the key aspects of electronic invoicing and real-time reporting in Mexico, focusing on the CFDI (Comprobante Fiscal Digital por Internet) system, based on the provided sources.

1. Overview of the CFDI System

The CFDI is Mexico’s mandatory electronic invoicing system, enforced by the Tax Administration Service (SAT – Servicio de Administración Tributaria). It has transformed how companies manage tax obligations and operations since its introduction. The CFDI serves as the foundation for electronic invoicing and is crucial for businesses to operate securely and avoid penalties.

Key Fact: Electronic invoicing in Mexico has been mandatory for most taxpayers since 2014.

2. The CFDI 4.0 Standard

CFDI 4.0 is the current mandatory version of the Digital Tax Receipt via Internet, effective since January 1, 2022. It replaced the previous CFDI 3.3 version and impacts all processes related to the issuance and reception of electronic invoices and associated documents (e.g., withholding receipts, payment complements, Bill of Lading, Payroll).

Main Changes in CFDI 4.0:

A new element for global/recapitulative invoices, impacting ticket portals and Point of Sale solutions.
Mandatory inclusion and validation of the receiver’s Postal Code and tax regime.
The receiver’s name is now mandatory and must be validated.
Addition of attributes for primary sector cases and to indicate whether the CFDI covers exports.
A new attribute at the concept level to indicate if an item is subject to tax.
Replacement of the third-party account complement with a new element at the concept level.
Adjustments to validation rules.

Important Requirement: CFDI 4.0 requires the pre-validation of all tax data registered with the SAT (both for individuals and legal entities) before stamping any electronic voucher. Taxpayers must ensure their information registered with the SAT is correct and up to date.

3. Associated CFDI Complements

Several complements are used with the CFDI to provide additional information for specific types of transactions:

Withholding and Payment Information Voucher version 2: Records tax withholdings and payments, particularly for taxpayers residing abroad. Version 2 includes attributes for place of issuance, related CFDIs, issuer’s tax regime, receiver’s Zip Code, mandatory names for both issuer and receiver, and new attributes for totals for profits and ISR (Income Tax).
Payment Complement version 2: Issued when payments are made in instalments or deferred. Version 2 includes fields for the total amount from Payment nodes, an attribute indicating if the payment is taxable, and a new element detailing taxes. It can only be used with voucher type ‘P’.
Foreign Trade Complement version 2.0: An annex to the CFDI for definitive exports under key A1. It identifies exporters and importers, provides detailed descriptions of goods, and aims to enhance security and fiscal control in international transactions. Key changes in version 2.0 (effective January 18, 2024) include a new prefix and namespace, removal of “TypeOperation” and “Subdivision” attributes, mandatory “Domicile” node in the Issuer Section, and mandatory “Goods” node with expanded decimal places for certain attributes. This complement is affected by interoperability agreements with the US and Canada.
Payroll CFDI Complement 4.0: Reflects payments made by a company to its employee. It is mandatory for all employers issuing payroll and promotes transparency and compliance with tax obligations. Changes in version 4.0 include standardized date formats and new validations integrated with CFDI version 4.0, making the recipient’s RFC, name, tax regime, and zip code mandatory.
CFDI Complement for Airlines: Required for airlines issuing CFDIs for ticket sales. EDICOM offers a portal to automate the online sending and reporting of these receipts to the SAT. The process for obtaining a CFDI for airline tickets varies depending on the purchase method (counter, phone, online, or travel agency). Airlines need to choose a reliable, SAT-certified provider for issuing electronic invoices.

4. The Mexican RFC (Registro Federal de Contribuyentes)

The RFC is the Mexican Tax Identification Number, required for any individual or company providing services or trading goods. It is essential for being identified as a taxpayer, filing tax returns, issuing electronic invoices, obtaining electronic signatures and digital stamps, accessing the Tax Mailbox, starting a job, and applying for financial services.

RFC Format:

Businesses: 12 digits: xxx-yyyyyy-zzz (xxx = first three letters of the company name, yyyyyy = date of incorporation – YYMMDD, zzz = randomly assigned alphanumeric digits).
Individuals: 13 digits: xxxx-yyyyyy-zzz (xxxx = derived from the first letters/vowels of surnames and first name, yyyyyy = date of birth – YYMMDD, zzz = randomly assigned alphanumeric digits).

Relevance for E-invoicing (CFDI v4.0):

With CFDI v4.0, there is an extensive mandatory validation process. Each RFC must exactly match the taxpayer’s name and registered address (postcode) according to their Constancia de Situación Fiscal (Tax Status Certificate). This strict validation aims to strengthen the process and reduce fraud. A common mistake is failing to exclude the legal structure suffix (e.g., S. en C. or S.C.A.) from the company name during validation.

Generic RFCs for B2C Transactions:

In B2C transactions, a generic RFC is used as there is no individual RFC.

XAXX010101000: For individuals with residency in Mexico.
XEXX010101000: For individuals with residency outside Mexico.

Constancia de Situación Fiscal: This is the Mexican tax certificate verifying a taxpayer’s status before the SAT. It contains key information including full name/company name, RFC, date of registration, fiscal address (with zip code), economic activity, tax regime, and tax obligations.

Other Mexican IDs (not to be confused with RFC):

CURP (Clave Única de Registro de Población): A personal identification number, not a tax number.
NSS (Número de Seguridad Social): The Mexican Social Security Number.

5. Real-Time Reporting

The Mexican e-invoicing system inherently includes real-time reporting. This is because before a CFDI becomes valid, it must be validated and authorised with a unique UUID by the SAT via an Authorized Certification Provider (PAC). This validation process instantly registers the invoice in the SAT’s systems. Both the issuer and recipient can access validated invoices via the SAT portal.

How it works:

Taxpayer generates the invoice (XML).
Invoice is sent to a PAC for validation.
PAC assigns a UUID and returns the stamped invoice.
Invoice is now registered in SAT’s systems (real-time reporting).
Issuers and recipients can access invoices via the SAT portal.

6. CFDI Cancellation Process

The SAT has implemented measures to prevent improper CFDI cancellations. The CFDI 4.0 scheme introduced new features making it mandatory to specify the reason for cancellation.

Cases for Cancellation:

Voucher issued with errors with relation (requiring reissuance and referencing the replacement).
Invoice issued with unrelated errors (without needing to reference another invoice).
The transaction was not carried out.
Nominative operation related to the global invoice (replacing a global invoice with a specific one upon customer request).

Cancellation Process:

Issuers send a cancellation request to the recipient via the SAT Portal or a certification provider.
As of January 1, 2022, specifying the reason for cancellation is mandatory for all CFDI versions.
If acceptance is required, the recipient receives a notification in their Tax Mailbox and has 72 hours to accept or reject. No response within 72 hours is deemed as acceptance.
Mandatory use of the Tax Mailbox for receiving and responding to cancellation requests.

Exceptions: Cancellation without Acceptance:

In certain cases, cancellation does not require recipient acceptance, including:

Invoices with a maximum amount of 5,000 pesos.
CFDIs for payroll, expenses, transfers, or income issued to taxpayers under the Tax Incorporation Regime (RIF).
CFDIs issued using the Mis Cuentas tool.
CFDIs covering withholdings and payment information.
CFDIs issued for transactions with the general public or residents abroad.
Cancellations made within 72 hours immediately following issuance.

Role of PACs in Cancellation: To cancel invoices, the services of an Authorized Certification Provider (PAC) are necessary. The PAC certifies and reports the cancellation request to the SAT.

7. CFDI Mass Download Service

This service allows companies to retrieve all their receipts directly from the SAT database, with a capacity of up to 200,000 receipts per request. It offers an intuitive web interface, recurring download scheduling, and an API for advanced integration. This service enhances convenience and optimises CFDI management through specific search parameters.

8. Advantages of the CFDI 4.0 System

Simplicity: PACs handle verification, numbering, and reporting to the SAT, simplifying the process for taxpayers.
Validation: PACs validate authenticity and ensure XML compliance, increasing security.
Storage: Some PACs offer secure storage of CFDIs as legal electronic originals.
Integrity: Digital seals and certification prevent modification of stamped invoices.
Automation: Facilitates technological solutions for electronic distribution and integration with internal systems.
Cost reduction: Digitisation and automation lead to economic and labour cost savings.
Paperless: Reduces paper usage, benefiting the environment and lowering associated costs.
24/7 Availability: Documents are accessible around the clock in a secure environment.

9. The Role of Authorized Certification Providers (PACs)

PACs are crucial to the Mexican e-invoicing system. They are certified by the SAT to validate and authorise CFDIs with a unique UUID, effectively facilitating real-time reporting. Companies must choose a reliable, SAT-certified provider. EDICOM is highlighted as an experienced and certified PAC offering various solutions for CFDI issuance, reception, validation, cancellation, and mass download.

Quote: “As an accredited PAC, we recommend verifying your tax details and generating a record of your current status.”

Quote: “To cancel invoices, it is necessary to use the services of an Authorized Certification Provider (PAC) such as EDICOM. In this process, the PAC is responsible for certifying and reporting to the SAT the invoice for which the cancellation request is made.”

10. Compliance Challenges and Benefits

Challenges:

Keeping up with frequent CFDI schema updates.
Managing large volumes of documents in real time.
Integrating PAC services into internal systems.

Benefits:

Reduced paper usage and fraud.
Easier tax compliance tracking.
Streamlined audit processes.
Improved government oversight and VAT collection.

11. Additional Compliance Requirements

Beyond CFDI, taxpayers must maintain e-accounting (Contabilidad Electrónica) with XML-based charts of accounts and trial balances submitted monthly. Complementos are required for specific industries.

Sources