Mexican Localization

Eagle industry Co.,Ltd.

Francisco Cabrales RomeroSr FI CO Consultant.

SAP Consulting
July 26th, 2013

Topics

Localizations
History
Financials
Sales & Distribution
Materials Mangement
Tools
Accounting Records on
possible scenarios in your
Mexican operation.

Localization Mxico

SAP has localized the system to fulfill the main legal and business requirements in
Mexico. Whenever a change in the law or business practice affects any of this
functionality already available, SAP is responsible to do the modifications to fulfill the
new requirements (i.e change in the law, new report format, new certificate format,
new bank format, etc).

The localization covers requirements in the Financials module (FI), the Sales and
Distribution module (SD) and the Material management module (MM), Human
Resources (HR).

History

Name
Established
Representative
Offices
URL
Business Year
Number of Employees

Eagle Industry Co., Ltd.

October 1, 1964
Tetsuji Tsuru; Representative Director, President
EKK Eagle Industry Mexico S.A. de C.V.
http://www.ekk.co.jp/eng/
From April 1 to March 31 of the following year

Business Outline

Manufacturing and marketing of mechanical seals, special

valves, plant devices, marine-related products, bellows devices;
and related installation work
Sumitomo Mitsui Banking Corporation
The Bank of Tokyo-Mitsubishi UFJ, Ltd.
Mizuho Corporate Bank, Ltd.
The Chugoku Bank, Limited
Nihombashi Corporation Certified Public Accountants

Main Banks

Public Auditing Firm

4,844

Supposed SAP Solution Value prototyping with SAP Best Practices for subsidiary integration in one
client and Automotive solution for parts supplier.

Financials
Mexico Localizacion
Chart of Accounts
Taxes:
VAT (IVA)
IEPS
Income Tax (ISR)
IETU
Deferred Tax
Withholding Taxes
Fixed Assets
Inflation Calculation
ISR Depreciation
Reports (System Information)
Standard Legal Information System
Third Party Operations Tax Declaration (Formato A-29 - DIOT)
Income and Expenses Reports to determine the IETUs Base Amount
Predetermined bank payment formats for payment program
Master Data Vendor/Customer

Financials
ML: Chart of Accounts
Chart of Accounts
It is possible to define the Chart of Account with the accounts required in Mexico.
In Mexico all company codes are obliged to register the Fiscal Net Income in a specific
account which will be added or deducted by the following concepts:
Fiscal Net Income amount of the Previous Fiscal Year
Incomes, dividends or investments made in foreign territories with tax
preferment rates.
Dividends received from company codes located in Mexico
Dividends or net incomes according to article 89th of the LISR (Ley del Income
Tax).
Theres no legal restriction in the mexican legislation regarding the length in digits in
the standard ERP system.

Financials
ML: TAXES
VAT (IVA)
In Mexico Company Codes are obliged to pay the corresponding V.A.T. in the terms
described in article 1 of the Mexican V.A.T. law (LIVA - Ley del Impuesto al Valor Agregado).
Every company code with a fiscal address in Mexico must register, report and pay the VAT
when:
sell or buy goods

sell or buy services (intangible goods)

Provide temporary goods or services usage
Goods and Service Imports
V.A.T. Rates in Mexico
16% - general tax rate
11% - tax rate
0% - tax rate

SAP Tax Code Configuration

Input VAT
Tax code

Tax rate (%)

V0

0 %

V1

11 %

V2

16 %

Output VAT
Tax code

Tax rate (%)

A0

0 %

A1

11 %

A2

16 %

Financials
ML: TAXES
IEPS

Not applicable for EAGLE

Excise duty, in the form of a special tax on production and services ( Impuesto Especial Sobre
Produccin y Servicios ), is levied at each stage in the production of alcoholic drinks, tobacco products,
and oil products. There are different rates of excise duty for different products. It is applied in addition
to VAT, but is calculated on the basis of the net price.
All alcoholic beverages sold in Mexico are subject to Mexicos 16% value added tax (VAT). In addition,
alcoholic beverages, tobacco, and denatured alcohol are also subject to the Impuesto Especial de
Productos y Servicios or IEPS (Special Tax on Products and Services). See below for tax rates.
Commodity

IEPS (Special Tax)

Beverage with alcohol content up to 14%

25%

Beverage with alcohol content above 14% and up to 20%

30%

Beverage with alcohol content above 20%

50%

Denatured alcohol

50%

Cigarettes

160%

Cigars and other tobacco

160%

Handmade cigars and other such tobacco

30.4%

Financials
ML: TAXES
ISR
The Income Tax (ISR) in Mexico is a direct tax on income. The current law on income tax came into
force on 1 January 2002 , repealing the law had been in force since 1 January 1981 .
The tax is caused by exercise and make provisional monthly payments on account of annual tax
returns must submit monthly interim payments made, and an annual statement, which must occur
three or four months after the fiscal year end as question of moral or physical person.
For the wages earned by providing a background service.
Professional activities.
For the lease or use of property.
In the interest you get.
For the prizes you get.
For the dividends and profits to divide other corporations.
For the sale or purchase of goods

Financials
ML: TAXES
IETU
According with article #1 of the Ley del impuesto empresarial a Tasa Vigente , all the physical
people with enterprise activity or intermediate regime, and the companies in national territory, as
well as the residents abroad with permanent establishment in the country by the income that they
obtain, are forced to the payment of the enterprise tax to unique rate, by the accomplishment of the
following activities:
Disposition of property
Benefit of independent services
Granting of the use or temporary enjoyment of goods and services
Rate
2008 16.5%
2009 17%
2010 and forward 17.5
IETU amount, will be the amount that we obtained as income (gain by sale of or or service), the less
the deductions, and that is according to right, giving a result that will multiply by 0.175.
Sap develops 2 standard reports that we will review later, to obtained the amounts for incomes and
expenses to determine IETUs base amount

Financials
ML: TAXES
Deferred Tax
According to the Mexican tax legislation 2002, VAT/IEPS taxes are not reported to the tax office when
the invoice is received; instead, they are reported at the moment of the payment. Hence, it is
possible that the tax calculated in a document is posted to an offsetting account. With standard
program RFUMSV25 the tax amount is transfered automaticaly to the final account.
In order to be able to cover this requirement, it is counted on the functionality of the DEFERRED
TAXES This functionality requires of:
Codes of normal as well as deferred taxes.
Accounts of taxes as much for the normal ones as for differed that uses accounts bridge
Import and clearing of the Banking Statement of account, in case it is wanted to make the
validation at the time of the payment in cash
Execution of the Program of Transfer of Taxes in order month.
SAP Notes & Programs
For Customers up to 4.7, the RFUMSV25 is available for this requirement.
For customers on ERP 2005 of higher, the RFUMSV50 should be used instead.
OSS NOTE 487616 VAT tax handling Mexico 1.1.2002 (IVA pago efectivo)
OSS NOTE 729636 RFUMSV25: Check bank clearing for Mexico
OSS NOTE 507679 RFUMSV25 and additional Tax

Financials
ML: TAXES
Posting Deferred Tax
1-. Invoice Creation
Acc. payable
1150

Expenses

Deferred Tax

1000

150

2-. Enter Payment: NOTHING changes here

Acc. payable
1150

Bank Account

1150

1150

3-. Transfer Deferred Tax Program is executed: A posting document is created

Deferred Tax
150

150

Target Tax Account

150

The tax reported to the Tax Authorities is the one that you have in the "Normal" Tax Account at the
end of the month

Financials
ML: TAXES
Witholding Taxes
Withholding taxes were developed in Mexico as a tool for the tax authorities to fight against tax
evasion
In some countries like Mexico, the law provides that invoice or payment recipients must withhold a
certain portion of the invoice amount and pay this as withholding tax on behalf of the vendor or
customer.
In Mexico, withholding tax is needed to be posted and reported to the tax authorities at regular
intervals for certain vendors and customers, such as self-employed people.
The way in which withholding tax is calculated depends on type of service. Transactions may:
Have a variable base for tax/SI contributions
Have different tax rates
Not be withholding tax-relevant
Rates Tax
Withholding VAT
Description
Fees and leasing

Freights retention

Withholding Income tax

TAXRATE
10.0%

4.0%

Description
Fees and leasing

Royalties

TAXRATE
10.0%

15.0%

Financials
ML: TAXES
Example of Witholding Taxes
Freelancers invoice:
1,000

Gross Amount

150

VAT tax (15%)

--------1,150

Total Amount of the invoice.

The company who pays the freelancer have to withhold:

10% of income tax (calculated on the gross amount)
2/3 of the VAT amount (of the invoice)

The amount to be paid is:

1,150

Invoice Total

- 100

( 10% Income tax of 1,000)

- 100

( 2/3 of the VAT amount 150)

----------1,095

Amount to be paid to the freelancer

Financials
ML: TAXES
OSS for Witholding Taxes
Income and/or VAT taxes can be withheld (ISR and IVA) at the payment time as required in
Mexico Program RFIDYYWT
The Constancia de Retencin is generated according to the 37A format
OSS note: 896677
384150 Mexico: RFKQST00 withholding tax ISR and VAT(IVA)
99666 ISR withholding tax for Mexico

Format Constancia de Retencin 37A format

Financials
ML: Fixed Assets
Fixed Assets Depreciation:
It is possible to define the different depreciation methods required for accounting and fiscal
depreciation calculations.
Principally 5 depreciation areas cover the Mexican legislation; the others are used for information of
historical value

Area

Name

01

Book Value

03

B-10

15

Tax

16

ISR

18

IMPAC

Financials
ML: Fixed Assets
Inflation Managment:
The system counts on the functionality that allows to realize the calculations of inflation according to
the defined thing in the B-10 Bolletin
As of January 2008, is no longer required to realize the calculation of the inflation, the functionality
follows available, in case one becomes to activate this requirement
The functionality consists on:
Global customizing
Inflation indexes definition for Mexico
Inflation Indexes values
It is only supported for the legal requirements for certain countries
It has to be customized for FI-GL and FI-AA modules
Revaluation in G/L accounts and fixed asset accounts is carried out with their specific standard
programs

Financials
ML: Fixed Assets
ISR Depreciation:
Depreciation calculation is according to the Income Tax (ISR) rules in the Asset
Accounting module (FI-AA)

In the OSS note: 1034582 there is a program that realizes calculation of the Update
of depreciation for the I.S.R. The program calculates the amounts according to the
rules defined in the law of the I.S.R.
The calculated values are entered in the aid of Fixed Assets in an area of specific
depreciation for the I.S.R. If it is desired, also it is possible to enter the amounts
calculated in statistical accounts in the accounting module.

Financials
ML: Reports (System Information)
Standard Legal Information System:
The system includes the Financial Statements (Balance Sheet and Profit and Loss), VAT and
Withholdings reports, Tax Certificates (Deferred Tax and Withheld Tax), Top customers and Top
vendors reports ( formulario 42)
Third Party Operations Tax Declaration (Formato A-29 - DIOT):
This report is available in OSS Note: 1082441. It allows generating the output file with the
required format defined by the Tax authorities.
OSS Note 1833840 DIOT report: Issue with user-exit
Income and Expenses Reports to determine the IETUs Base Amount:
Note 1109979 New Flat Tax (reffered to as "IETU") in Mexico .
Both reports display all the payments and their details within a period so the company can
determine the transactions that have to be included in the IETUs base amount. The Income Tax
Report is available in OSS 1131178 and the Expenses Tax Report in OSS 1136244.
Predetermined bank payment formats for payment program:
Payroll format for Santander
Vendors Payments and Payroll formats for BANK (Formato C), last version in OSS note 657360.
SAPs scrpit- F110_MX_CHEQUE

Financials
ML: Master Data Vendor & Customer
Tax Number in Customers and Vendors:
There are two tax numbers in Mexico that are relevant to the SAP System, the RFC number and the
CURP number.
RFC number (Registro Federal de Contribuyentes): A tax number, in Mexico, assigned to legal persons.
All legal persons must have an RFC number that identifies them for legal tasks.
The structure of this number is different between each type of person.
Companies: 12 character
Person: 13 character.
It contains its first letterof its name, last name, its birthday date and 3 character that it is call
homoclave
CURP number (Cdula de Identificacin Fiscal con Clave nica de Registro de Poblacin): A tax
number, in Mexico, assigned to natural persons.
Customizing
Maintain your own RFC numbers in Customizing
Financial Accounting (FI)
Financial Accounting Global Settings

Company Code

Enter Global Parameters.

Sales & Distribution

ML: Number range in S&D documents
Legal Number Documents
There are 2 different types of legal documents in Sales and Distribution module:
1. Invoice
2. Credit Memos
This documents can be
Pre-numbered forms: (OSS Note 643681): It the company is not self-printer it is possible to
control the external folio number for the official documents (invoices, Credit Memos)
automatically in SAP.
Digital Invoices and Credit Memos: The functionality to issue the Electronic Invoices according to
the rules defined in the Anexo 20 of the law. Please refer to OSS notes: 1280467 and 1303712
Each type of document has it own range of number.

Sales & Distribution

ML: Digital Invoices &Credit Memos
Digital Invoices & Credit Memos
From January 1th 2011 all invoices with amount greater than $2,000.00MXP must be issued digitally
according with the requirements of Comprobantes Fiscales Digitales (CFD) a.k.a. Digital Invoices.
Types of issue authorized by SAT (legal entity)
Contributors that issue Digital Invoices using an Authorized Third Party Systems
Contributors that issue Digital Invoices using their own Systems
Obligations of Issue and Reception of Digital Invoices
ISSUE
Report monthly to SAT all the information about the Digital Invoices issued
Keep in electronics medias all the Digital Invoices and provide to the authorities a way to consults
its.
Issue Global Digital Invoices to the General Public Sales operations (using the Generic RFC
XAXX010101000)
Issue Digital Invoices to foreign citizens using the Generic RFC XAXX010101000
RECEPTION
Keep in electronics medias the received Digital Invoices and provide to the authorities a way to
consults its.
Check the digital seal of every Digital Invoice received (using the SAT methods for this).

Sales & Distribution

ML: Digital Invoices &Credit Memos
Requisite for Digital Invoices
Obtain the FIEL (FirmaElectrnicaAvanzada)
Obtain the Digital Seal from SAT (LegalAuthority)
Request at least one numbering series and prefix.
Ful fill the technologic standard provided by SAT to create the XMLfile, according to Annex 20 of
the Resolucin Miscelanea Fiscal of 2009.
Create and send the monthly report to SAT

SAP Notes

SAP Note 1318342 -Digital Invoice Mexico: IDoc basic type INVOIC02 Extension
SAP Note 1711011 -Digital Invoice Mexico: CFD 2.2
SAP Note 1321680 -Digital Invoice Mexico: IDoc basic type FIDCCP02 Extension

Sales & Distribution

ML: Digital Invoices &Credit Memos
Conceptual Design of the solution

SCOPE of Functionality

Asignation of PreFix and series Number into the SD /

FI Documents
Scope of functionallity: ISSUE
Numbering control of PreFix and Series number provided by SAT at header level.
Creation of the Original Chain (Cadena Original) according to legal requirements.
Capacity of creation of Addendas and Complements.
Digital seal in every billing document issues from SD or FI module.
Digital Invoices available in the system for internal or external audit processes.
Information in the system for print or re-print each documents.
Month report according with the SAT requirements.
Creation of XML file from PI according to the SAT requirements.
Creation of the PDF file (image of the Billing document)
Commercial Addendas and complements

Asignation of PreFix and series Number into the SD /

FI Documents

Example of XML
The XML file is Generated from SAP PI.

Billing Printed

Monthly Report

Materials Management

Inflation calculation (OSS note: 953106 and 787680):

According to the B-10 definition, it is possible to calculate the inflation for
the Stock and the Goods Issues in the Material Management module.

Tools for generating different government

formats

Tools for generating different government formats:

Data Medium Exchange Engine = DMEE:
This is a standard tool that allows generate output files with any format
required. It is generally used to generate bank payment transfer files, bank
account statements import and could be also used for taxes purposes too.

Data Retention Tool = DART (standard):

This tool allows transfer to data medium for tax audit purposes

Accounting Records on possible scenarios in

your Mexican operation. (Example)

Accounting Records on possible scenarios in

your Mexican operation.(Example)