Don’t Let the 2014 Fiscal Reform Negatively Affect You



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By Sandra D. Gaytan Diaz

If you are conducting business in Mexico you will likely have heard of the many new fiscal changes that were brought in this year.

Operating a business legitimately doesn’t have to be difficult. However it does require you to follow some basic steps and principals that are outlined for you below.

1. As soon as possible begin providing Electronic Facturas to your clients by installing one of the authorized electronic factura programs. This is a new obligation imposed on all companies in Mexico in 2014. This way you will avoid any possible fines for not issuing Electronic Facturas.

2. For every purchase or service you hire, request a factura. It is the obligation of the supplier to provide you an Electronic Factura. If they are not willing to provide you a factura, change to another supplier.

3. Request that the factura is sent to your email in both .pdf and .xml format. The rule set by Hacienda (Mexican IRS) is that you have to keep your facturas in .xml format in your computer in case of any possible audit.

4. Avoid paying by cash for your purchases. Preferably use a debit card, credit card or check. This way you have more control over your expenses and bank statements.

5. We all know that the cost for gasoline is expensive. Hacienda established that the purchase of gasoline is only tax deductible when paid with the card registered to your fiscal name or company, or certificates from the Gas Company, not by cash.  Make sure to request a factura when paying this way.

6. If you have your business established as a Mexican Corporation, hire a good accountant that keeps you informed of the new tax regulations and that monthly and annually files your tax declarations. Always request a copy of the electronic declaration that your accountant files.

7. If you are conducting small business in Mexico and you are still not registered at Hacienda, register immediately. It is very easy to obtain your Tax ID Number and you will avoid a very expensive fine.  Make sure to confirm that you have a Work Visa from Mexican Immigration before completing this step.

8. If you are paying any utility bills (electricity, water, telephone) related to your business, put the contract in the name of your Company in order to get the benefit of tax deduction and pay them from your company account or with your company card.

9. If you are living full-time in Mexico and planning to buy a car, definitely obtain a Mexican Driver’s License and purchase the car at a Mexican Car Agency so that you can receive a facture receipt. This way the cost will be tax deductable and you will save the expensive importation fees and costs.

10. It is important to clarify that property taxes did not increase. A great tip is to prepay the taxes when the City of La Paz offers the big discounts in October and November, sometimes 35% or even 40%. We all love to save some money!

11. Factura receipts on cash purchases are only valid for purchases up to $2,000 pesos.  If you purchase one or multiple items on one factura receipt over $2,000 pesos in cash you will not be able to deduct this receipt from your income.

12. Purchases or withdrawals made from your company accounts or fiscal accounts will be taxed at the full rate plus an additional 10% on the withdrawal if a valid factura receipt is not provided that matches the withdrawal.

13. Open a bank account in Mexico, where your clients can make direct deposits or wire transfers and where you can make your payments out of.

14. Once you open a bank account in Mexico, be sure to get online banking. This way you can pay your taxes to Hacienda online. The process is very simple.

15. Check with your accountant which types of purchases are permitted for your company account.  For example a restaurant is permitted to purchase food and alcohol products whereas a bike rental company would not be, and vice versa a bike rental company would be permitted to purchase bicycles but not food and alcohol.

By ensuring you are asking and receiving a factura receipt in the name of your company wherever possible you are doing two main things:

Firstly, you are ensuring you are deducting all of your real expenses against the income that your business has earned.  If you are making business purchases without a factura receipt and at the end of the month you paid income taxes, you in essence were paying 46% more for the purchases that you made without a factura that month, which is not a good business practice.

Secondly, you are ensuring the companies that you are doing business with are also legitimate tax paying businesses which creates a fair playing field for all businesses here in La Paz.

And finally by paying your taxes and ensuring others are paying theirs you will be able to avoid any late fees and fines and most importantly will be contributing to the City of La Paz and helping our local government to improve the city, build schools, public hospitals, pay pension programs and much more.

For more information on tax reforms and regulations feel free to contact

Attorney at Law Sandra D. Gaytan at sandra@gaytanlegalservices.com or www.gaytanlegalservices.com.

 

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