At the point of writing, this Bill is still under analysis and discussion in the Mexican Congress. The proposed modifications to the FTC include rules aimed at simplifying the tax requirements for invoices; these provisions are in line with the commitments and efforts of the Mexican government to reduce the administrative tax burden of taxpayers. The documentation, by way of invoices, is a key issue to claim the deduction of expenses for tax purposes. However, the task of analysing the accuracy of an invoice has become a complex process for taxpayers, since according to the explanation to the tax reform, prepared by the Mexican government, there are 158 different requirements (some of which are duplicated) stated in 27 articles and 24 regulations, which are spread in 11 different types of provisions, including: the FTC, the Mexican Income Tax Law, the Value Added Tax Law and the Miscellaneous Tax Regulations, among others. It is worth mentioning that the specific number of requirements varies on a case by case basis.
Under this context, as per the proposed regulations, all tax requirements for invoices would be gathered in the FTC and any reference to invoices in other Federal Tax Laws should be ruled by the FTC. In addition, certain requirements such as the name of the individual or corporation that issues the invoice, along with his or its tax domicile shall not be required anymore since the tax authorities believe they already have such information in their records. In this case, the taxpayer’s tax ID should be enough to document his or her identity. Indeed, the objective is to avoid the duplication of requirements.
In addition, taxpayers issuing invoices to foreign residents will be required to include a standard ID, which indicates that the recipient of the invoice is a foreign resident. Additional provisions would be aimed at simplifying the use of bank statements as a way to document expenses.
Gathering most of the tax requirements for invoices in the FTC and eliminating some duplicated requirements would not only bring certainty to the taxpayer to comply with tax provisions, but it would also reduce their administrative tax burden. Of course, additional effort, from both the tax authorities and the Mexican Congress, is required to successfully reduce the complexity of the Mexican tax system.
David Cuellar (david.cuellar@mx.pwc.com) and Sergio Lugo (sergio.lugo@mx.pwc.com)
PwC
Tel: + 52 55 5263 5816
Fax: +52 55 5263 6010
Website: www.pwc.com
