Note: It is important to mention that no additional requirements will be touched in the case of payments to related parties.
related parties.
Is it necessary to issue CFDI for foreign payments?
Well, the answer is yes, the provision is based on Article 76 section III regarding the proof of payment and withholding, and this requirement is independent of the proof of the transaction, which is a requirement set forth in Article 27 section III.
The deductions authorized in this Title must meet the following requirements:Article 27.
following requirements:
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III. Be covered by a tax voucher.
Let us analyze the provisions themselves:
BE COVERED BY A TAX RECEIPT
The Miscellaneous Resolution contains the following provision that clarifies how we can comply with the requirement of the deduction voucher:
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[one_sixth nr=»first»]2.7.1.16.[/one_sixth]
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This last paragraph was modified as of the second miscellaneous resolution of the 2017 fiscal year, to read as follows:
SECOND AMENDMENT TO THE RMF
Tax receipts issued by residents abroad without a permanent establishment in Mexico
For the purposes of Articles 29, second to last paragraph and 29-A, last paragraph of the CFF, taxpayers who intend to deduct or credit tax based on receipts issued by foreign residents without a permanent establishment in Mexico, may use such receipts provided they contain the following requirements:
- Name, denomination or company name; address and, if applicable, tax identification number, or its equivalent, of the issuer.
- Place and date of issue.
- RFC code of the person in favor of whom it is issued or, in its absence, name, denomination or corporate name of such person.
- The requirements established in article 29-A, section V, first paragraph of the CFF. 1
- Unit value stated in number and total amount stated in number or letter.
- In the case of the sale of goods or the granting of their temporary use or enjoyment, the amount of taxes withheld, as well as the taxes transferred, with a breakdown of each of the corresponding tax rates.
The provisions of this rule, in the case of the alienation of goods or the granting of their temporary use or enjoyment, will only be applicable when such acts or activities are carried out in Mexican territory in accordance with the VAT Law.
CFF 28, 29, 29-A, LIVA 1
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SECOND AMENDMENT TO THE RMF
Tax receipts issued by foreign residents without a permanent establishment in Mexico.
2.7.1.16. For the purposes of Articles 29, second to last paragraph and 29-A, second to last paragraph of the CFF, taxpayers who intend to deduct or credit for tax purposes based on vouchers issued by residents abroad without a permanent establishment in Mexico, may use such vouchers provided they contain the following requirements:
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VI. In the case of the alienation of goods or the granting of their temporary use or enjoyment, the amount of the taxes withheld, as well as the taxes transferred, with a breakdown of each of the corresponding tax rates; or, the CFDI issued by the taxpayer for the withholding of the taxes made to said resident abroad without a permanent establishment in Mexico is attached to the receipt issued by the resident abroad.
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CFF 28, 29, 29-A, LIVA
Article 29 of the Federal Tax Code states that when the tax laws establish the obligation to issue tax receipts, such receipts must be issued by means of a digital document.
PROOF OF WITHHOLDING AND PAYMENTS
In order to obtain a deduction in terms of the provisions of the Income Tax Law, all the requirements for a particular deduction must be complied with, otherwise, the deduction could be rejected by the tax authorities.
Among the obligations indicated for legal entities, several are mentioned in article 76, some are applicable to the subject of this note, since they refer to payments to non-residents in Mexican territory that have a source of wealth located in Mexico, such as interest, leases, sale of real estate and furniture, royalties and others.
One of such obligations for the legal entities that carry out these operations is to comply, among other things, with the provisions of Section III, which I transcribe as follows:
Article 76. Taxpayers who obtain income of those indicated in this Title, in addition to the obligations established in other articles of this Law, shall have the following:
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III. Issue tax receipts stating the amount of payments made that constitute income from a source of wealth located in Mexico in accordance with the provisions of Title V of this Law or payments made to establishments abroad of Mexican credit institutions, in the terms of Article 48 of this Law and, if applicable, the tax withheld from the resident abroad or the aforementioned credit institutions.
From which we can draw the following conclusions:
- Legal entities must issue a tax receipt (which in this case would be the particular CFDI for the case) for the amounts paid that constitute a source of wealth located in Mexico in accordance with Title V of the Mexican Income Tax Law.
- Also of payments made to foreign establishments of domestic credit institutions, and
- Also, if applicable, of taxes withheld from foreign residents or credit institutions.
Normally, we have the idea that CFDIs are sales invoices, credit notes or, if applicable, foreign trade and payroll receipts, however, here the Income Tax Law (LISR) states that there is another type, and that this is issued by the payer or withholder, not by the taxpayer, which in any case, would be the foreign resident who obtained the income.
The question then is how and when such tax receipts are issued, and the Miscellaneous Resolution in the rule that we partially transcribed below, gives us the enlightenment (I transcribe only what is relevant to payments and withholdings to Non-Residents):
Issuance of the CFDI of withholdings and payment information
2.7.5.4. For the purposes of Articles 76, Sections III, ..., the CFDI of withholdings and payment information shall be issued through the electronic document included in Annex 20. Likewise, the CFDI of withholding may be issued on an annualized basis in the month of January of the year immediately following that in which the withholding or payment was made.
In cases where a CFDI is issued for the performance of acts or activities or for the collection of income, and includes all the information on tax withholdings made, taxpayers may choose to consider it as the CFDI of the withholdings made.
When any tax provision refers to the obligation to issue a tax receipt for withholdings made, it shall be issued, unless otherwise provided, in accordance with the provisions of this rule.
CFF 29, 29-A, LISR 76, 86, 110, 117, 126, 127, 132, 135, 139, LIEPS, 5-A, LIVA 32, 33, RMF 2017 3.1.15., 3.17.8.
Is it possible to issue a paper certificate?
In our opinion, this is not possible, since withholding tax receipts are one of the documents mentioned in Article 29 of the Federal Tax Code, which regulates the manner in which the various receipts indicated in the tax laws must be issued.
I transcribe what is relevant to support this statement.
OBLIGATION TO ISSUE THEM
When the tax laws establish the obligation to issue tax receipts for the acts or activities performed, for the income received or for the withholding of taxes made, taxpayers must issue them by means of digital documents through the Internet page of the Tax Administration Service (Servicio de Administración Tributaria).
Persons acquiring goods, enjoying their temporary use or enjoyment, receiving services or those to whom taxes have been withheld must request the respective digital tax receipt by Internet.
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And the same article concludes by stating that the rules for taxpayers to issue their tax receipts by their own means, through service providers, or with the electronic means that will be regulated, will be issued through the miscellaneous tax resolution. It also indicates that the same miscellaneous resolution will determine the characteristics of the vouchers that will be used for the transportation of goods.
The Tax Administration Service, by means of general rules, may establish administrative facilities for taxpayers to issue their digital tax receipts by their own means, through service providers or with the electronic means determined in such rules. Likewise, through said rules it may establish the characteristics of the receipts that will be used to cover the transportation of merchandise.
The generic list of the requirements that such tax receipts, hereinafter CFDI, must contain is listed in Article 29-A of the Federal Tax Code.
The above is important because, in addition to the list of data and the characteristics of how to include them, it is stated that in cases of covering withholdings, the same CFDIs will also be used, which must comply with the requirements that will be determined by means of the general rules (Miscellaneous Resolution), and concludes with an important sentence, stating that in the event that the indicated requirements are not met or the data is included in a different form from the one indicated in these provisions, the expenditure will not be deductible.
CHARACTERISTICS OF DIGITAL VOUCHERS
Article 29-A. The digital tax receipts referred to in Article 29 of this Code shall contain the following requirements:
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The Internet digital tax receipts generated for purposes of covering the withholding of taxes must contain the requirements determined by the Tax Administration Service by means of general rules.
Amounts covered by tax receipts that do not meet any of the requirements set forth in this provision or in Article 29 of this Code, as the case may be, or when the information contained therein is shown in a manner different from that set forth in the tax provisions, may not be deducted or credited for tax purposes.
With the foregoing, it has been established that those who are obliged to issue receipts for their operations, payments or withholdings, must issue them in accordance with the provisions of articles 29, 29-A and the provisions of the Miscellaneous Tax Resolution, however, it would now be important to review the case of payments abroad, that is, payments that constitute a source of wealth in Mexican territory, and that will be reflected in a deduction for the legal entity. It is true that the receipt of the expense will be issued by the foreigner, and that such receipt cannot be exactly as required by the tax authority and the Mexican tax provisions, since these do not have extraterritorial scope, and it has been established that with some requirements that are met in the receipt of the operation, the deduction of the expenditure will be possible, at least in principle.
CONCLUSIONS
We can conclude the following:
To deduct operations carried out abroad or with Non-Residents in the country, we can use as proof of the operation the one issued to us in their country, which can be for purchases of merchandise, investments, or services, as long as it contains at least the information indicated in rule 2.7.1.16.
In addition to this voucher, it is necessary to comply with the provisions of Article 76, Section III, regarding having a payment voucher and a withholding voucher, which may be the same.
It should be noted that it is possible to issue a single annualized voucher in the following January, for the performance of acts or the receipt of income, which includes the totality of the same and the withholdings of the fiscal year made and may be considered as the voucher of the withholdings.
At Kreston CSM we can assist you in complying with the necessary requirements to achieve your foreign payment deductions.
1 Refers to various requirements that must be incorporated in the voucher depending on the type of good or service received. V. The quantity, unit of measurement and type of goods or merchandise or description of the service or use or enjoyment covered.
The vouchers issued in the following cases must additionally comply with what is specified in each case:
- a) Those issued to individuals who comply with their tax obligations through the coordinated party, who have opted to pay the tax individually in accordance with the provisions of Article 73, fifth paragraph of the Income Tax Law, must identify the vehicle that corresponds to them.
- b) Those that cover deductible donations in terms of the Income Tax Law, must expressly state such situation and contain the number and date of the official document evidencing the authorization to receive such donations or, as the case may be, the corresponding renewal official document. When they cover goods that have been previously deducted for income tax purposes, it shall be indicated that the donation is not deductible.
- c) Those issued for obtaining income from leasing and in general for granting the temporary use or enjoyment of real estate, must contain the property account number of the property in question or, if applicable, the identification data of the non-amortizable real estate participation certificate.
- d) Those issued by taxpayers subject to the excise tax on production and services that sell manufactured tobacco in accordance with the provisions of Article 19, Section II, last paragraph of the Excise Tax Law, must specify the total weight of tobacco contained in the manufactured tobacco sold or, as the case may be, the quantity of cigars sold.
- e) Those issued by manufacturers, assemblers, marketers and importers of automobiles in definitive form, whose destination is to remain in national territory for circulation or marketing, must contain the vehicle identification number and the vehicle code corresponding to the automobile.
The value of the vehicle sold must be expressed in the corresponding voucher in local currency.
For purposes of this section, automobile is defined as defined in Article 5 of the Federal New Automobile Tax Law.
When goods or merchandise cannot be individually identified, this shall be expressly stated.
