In April 2014 the new Federal Tax Code Regulations were published in the Official Gazette and came into effect on April 3rd.
As part of the reform, new accounting elements have been added as well as new requirements and regulations regarding safekeeping and storage.
New rules that companies will have to follow have also been added regarding accounting entries.
These changes are of vital importance, please therefore find below some of the most important aspects of this reform:
In accordance with the new Federal Tax Code Regulations, the elements that integrate the accounting are the following:
* Accounting entries (including the chart of accounts and the documents to back up the entries)
* Tax ID (RFC) registration notifications.
* Tax returns (annual tax return, informatives, monthly tax installments, etc.).
* Bank account statements and the reconciliations.
* Documentation related to personnel hiring.
* Documentation regarding foreign trade operations (import and export).
* Documentation and information regarding all operation, acts or activities.
Regarding some of the new concepts, such as documentation regarding hiring personnel, the regulations do not specify what type of documents are being referred to, which is why it can be interpreted as referring to any type of documents such as contracts, job offers, registration with the Social Security, etc.
Regarding requirements, the accounting has to meet the following:
Accounting entries will have to:
* Be analytical and registered in the month during which the operation takes place. To this effect the Authorities will grant 5 days after the operations are carried out to register them in the accounting.
* The books will have to be prepared on a daily basis and in a descriptive manner (date, concept, operation number, etc.).
* Each operation must be linked to the folio assigned to the electronic invoice.
* Investments made must be identifiable.
* The following financial statements will have to be prepared:
o Statement of Financial Position (Balance Sheet).
o Statement of Shareholder’s Equity Variation.
o Statement of Source and Application of Funds.
o Trial Balance.
o The Statement of Financial Position will have to be related to the account corresponding to each operation.
* Identify the taxes that have to be cancelled or refunded, based on the refunds received and the deductions carried out.
* Regarding tax incentives and benefits, proof that the necessary requirements are being met in order to apply will have to be provided.
* Identify inventory by distinguishing what has been bought and what has been produced, raw materials and finished or semi-finished products, as well as what has been sold and what is to be donated, or in its case, destroyed.
* Accounting will have to be in Spanish and figures must be stated in local currency. When the information on the electronic invoices, data and backup documentation that is part of the accounting is in a language other than Spanish, or the values are in a foreign currency, the corresponding translation will have to be provided as well as the exchange rate used for each operation.
* Establish cost centers, identifying the operations, acts or activities for each branch or establishment, including those located abroad.
* Each accounting entry will have to include
o The date on which the operation was carried out.
o A description or concept.
o The amount or unit of measurement
o The method of payment, specifying whether it was cash, credit or in installments.
o The means of payment or cancelation of the obligation.
o When payment is made in kind or through an exchange, this must be indicated as well as the type of good or service granted as compensation and its value.
* Deposits and withdrawals made to and from the bank accounts must be identifiable and must be checked against operations carried out.
* Regarding inventory, adequate controls to allow identifying each unit, type of merchandise, production in process and corresponding purchase dates must be kept as well as control of inventory increases and decreases.
* Each accounting entry will have to include the corresponding Value Added Tax transferred to the taxpayer and that paid upon import, corresponding to expenses and investments.
It is important to mention that all documentation regarding the design of the electronic system used to store and process the accounting information and diagrams will also have to be kept and stored as part of the accounting, equipment and operators will have to be made available to the Tax Authorities if required in order to provide the necessary back up in case of a review.
If companies do not comply with the above mentioned regulations, they may be subject to the following sanctions: (View PDF)
The new regulations and requirements regarding accounting will cause companies to incur in additional control and system expenses in order to be able to correctly comply with the new tax regulations.
However, there are still many doubts regarding the steps and requirements that will have to be met, we therefore believe that the Authorities will have release a publication regarding the concerns expressed by the taxpayers, which we will be following up on in order to keep you informed.