Ask the Expert: How does Mexico's new electronic tax filing system work? Ask the Expert: How does Mexico's new electronic tax filing system work?

Ask the Expert: How does Mexico's new electronic tax filing system work?
30 Apr 2015

What do HR, payroll and finance professionals need to know about the new regulations on electronic accounting which came into effect in Mexico in 2015?

Who must comply?

Beginning in January 2015, the 2014 Mexican tax reforms require certain Mexican taxpayers to electronically upload their accounting records to a secure website managed by Mexico’s tax administration service, Servicio de Administración Tributaria (SAT).

Under the laws in effect throughout 2014, all Mexican enterprise taxpayers as well as certain individuals earning business income as sole proprietors, must maintain accounting records on a monthly basis that conform to Mexican accounting standards and Mexican tax rules of accounting. Non-residents that have a permanent establishment in Mexico must file electronically the accounting records associated with said permanent establishment.

Who is exempt?

Workers’ unions and their affiliated bodies, as well as the federal, state and municipal governments and any institutions, which are legally required to return the full amount of their operational surplus to the federal government, are exempt. This also includes individuals whose income from the immediately preceding year did not exceed two million MXN, who use the ‘mis cuentas’ function, or who are currently covered by the Fiscal Incorporation scheme.

What information must be sent?

• A chart of accounts needs to be filed preliminarily and every time there is a change.
• A trial balance needs to be filed monthly and include initial balances, period transactions and final balances for each and every account including assets, liabilities, equity, P&L and memo accounts.
• Journal entries need to be filed when requested by the SAT, including the details of each transaction such as account, subaccount and payment information.

Taxpayers must electronically file accounting records for each month of 2015 and subsequent years on the 25th and 27th day (corporations and individuals with sole proprietor business income, respectively) of the following month. Taxpayers must file any changes to their original submissions within three business days after the changes occur.

How to send information

To satisfy electronic filing requirements, taxpayers must maintain their records on a platform that can create XML-formatted files.

Taxpayers must submit their files electronically by uploading the XML-formatted files through the SAT electronic secure mailbox system. They should consult with their IT departments to determine whether their systems can conform to these requirements.

Are there penalties for non-compliance?

Yes. Article 84 of the Federal Tax Code (CFF) establishes a fine of between 1,200 and 11,960 MXN (£60 and £598) for taxpayers who fail to file electronic accounting. The penalty will be between 260 and 5,980 MXN (£13 and £299) for those who do not keep a special book or registry of income and expenses as required by law, and also for those who do their accounting in a different way or in different places to those established by the CFF.

For taxpayers whose accounting entries do not correspond to operations carried out, or are incomplete, inaccurate or submitted after the deadline, a fine of between 260 and 4,790 MXN (£13 and £240) will be applied.

The fine for not keeping accounting records available to the authorities for the established amount of time will be between 730 and 9,560 MXN (£37 and £478).

Direct audits may be conducted by the SAT and they may still require the taxpayer to produce its accounting records even if these records were uploaded to the SAT’s website on time. In the event that the taxpayer’s uploaded data contains errors, the SAT will notify the taxpayer by email.

The taxpayer will have three business days to submit revised information. If the taxpayer fails to correct the errors identified in the notice within the three-day period, the SAT will treat the information as not filed. This will expose the taxpayer to substantial penalties and fines and a potential SAT audit.

What else do you need to know?

If your current system is not compatible with the government’s electronic format, you will need to have it converted. You will need to acquire the necessary resources to drive the implementation of this new regulation on time and prepare to conduct training with your employees.

Visit the SAT Website on a regular basis and stay up to date on current legislations. Always consult with a tax advisor regarding any questions to avoid unnecessary tax and penalty exposure.

By Christine Draeger, vice president, global marketing, SafeGuard World International

What do HR, payroll and finance professionals need to know about the new regulations on electronic accounting which came into effect in Mexico in 2015?

Who must comply?

Beginning in January 2015, the 2014 Mexican tax reforms require certain Mexican taxpayers to electronically upload their accounting records to a secure website managed by Mexico’s tax administration service, Servicio de Administración Tributaria (SAT).

Under the laws in effect throughout 2014, all Mexican enterprise taxpayers as well as certain individuals earning business income as sole proprietors, must maintain accounting records on a monthly basis that conform to Mexican accounting standards and Mexican tax rules of accounting. Non-residents that have a permanent establishment in Mexico must file electronically the accounting records associated with said permanent establishment.

Who is exempt?

Workers’ unions and their affiliated bodies, as well as the federal, state and municipal governments and any institutions, which are legally required to return the full amount of their operational surplus to the federal government, are exempt. This also includes individuals whose income from the immediately preceding year did not exceed two million MXN, who use the ‘mis cuentas’ function, or who are currently covered by the Fiscal Incorporation scheme.

What information must be sent?

• A chart of accounts needs to be filed preliminarily and every time there is a change.
• A trial balance needs to be filed monthly and include initial balances, period transactions and final balances for each and every account including assets, liabilities, equity, P&L and memo accounts.
• Journal entries need to be filed when requested by the SAT, including the details of each transaction such as account, subaccount and payment information.

Taxpayers must electronically file accounting records for each month of 2015 and subsequent years on the 25th and 27th day (corporations and individuals with sole proprietor business income, respectively) of the following month. Taxpayers must file any changes to their original submissions within three business days after the changes occur.

How to send information

To satisfy electronic filing requirements, taxpayers must maintain their records on a platform that can create XML-formatted files.

Taxpayers must submit their files electronically by uploading the XML-formatted files through the SAT electronic secure mailbox system. They should consult with their IT departments to determine whether their systems can conform to these requirements.

Are there penalties for non-compliance?

Yes. Article 84 of the Federal Tax Code (CFF) establishes a fine of between 1,200 and 11,960 MXN (£60 and £598) for taxpayers who fail to file electronic accounting. The penalty will be between 260 and 5,980 MXN (£13 and £299) for those who do not keep a special book or registry of income and expenses as required by law, and also for those who do their accounting in a different way or in different places to those established by the CFF.

For taxpayers whose accounting entries do not correspond to operations carried out, or are incomplete, inaccurate or submitted after the deadline, a fine of between 260 and 4,790 MXN (£13 and £240) will be applied.

The fine for not keeping accounting records available to the authorities for the established amount of time will be between 730 and 9,560 MXN (£37 and £478).

Direct audits may be conducted by the SAT and they may still require the taxpayer to produce its accounting records even if these records were uploaded to the SAT’s website on time. In the event that the taxpayer’s uploaded data contains errors, the SAT will notify the taxpayer by email.

The taxpayer will have three business days to submit revised information. If the taxpayer fails to correct the errors identified in the notice within the three-day period, the SAT will treat the information as not filed. This will expose the taxpayer to substantial penalties and fines and a potential SAT audit.

What else do you need to know?

If your current system is not compatible with the government’s electronic format, you will need to have it converted. You will need to acquire the necessary resources to drive the implementation of this new regulation on time and prepare to conduct training with your employees.

Visit the SAT Website on a regular basis and stay up to date on current legislations. Always consult with a tax advisor regarding any questions to avoid unnecessary tax and penalty exposure.

By Christine Draeger, vice president, global marketing, SafeGuard World International