New Mandatory RFC Validation Method in Mexico

July 6, 2022

Mexico’s latest version of its electronic invoicing system will become mandatory on 1st of January 2023. The RFC validation within the e-invoicing process will require matching with taxpayers’ name and ZIP code - increasing the level of required taxpayer KYC.

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Update

Mexico has launched a new electronic invoice version (CFDI v4.0) which will be fully mandatory as of 1st January 2023. WIthin the new requirements for taxpayers, there is a new mandatory RFC validation process in place which aims at strengthening the validation scrutiny and reducing potential fraud further.

 

Change to the existing RFC validation approach

Among many other modifications, the Mexican tax administration service (SAT) has decided to roll back its long-standing validation approach and implement a new one. The  existing approach only requires taxpayers to check their customer RFC (Mexican Tax Identification Number). 

RFC stands for 'Registro Federal de Contribuyentes'. It is a unique ID for individuals and businesses and is used for identification of taxpayers in front of SAT for a variety of use cases. 

To combat fraud and misuse of RFCs within Mexico, local tax authorities are introducing a stricter method of RFC validation, whereby each RFC will need to match the taxpayer name and its registered address according to the SAT tax profile.

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New requirements

The new rules require taxpayers to validate registered businesses' (i) name, (ii) zip code, and (iii) RFC before issuing an invoice.

The SAT requires the exact name shown in the RFC certificate, including spaces, special characters, numbers, and symbols. Moreover, the tax authority demands the zip code of the registered address in that certificate. This means it cannot be the zip code of a branch, office, or any other headquarters. 

Moreover, an interesting fact around the new RFC validation method is that for legal entities, the name of the company being validated must exclude the legal structure suffix (eg. S. en C. or S.C.A.) in order for validation to go through successfully.

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How can Fonoa help?

Fonoa allows companies to perform seamless Tax KYC in over 75 countries globally, and get a full insight into their customer / supplier tax profile. With Lookup, Fonoa’s TIN number validator, you can validate RFC + Name + Zip Code in Mexico both via API and our dashboard (in bulk and individually).  

To make this process seamless, where the validation request must exclude the legal structure suffix, Fonoa automatically removes the suffix from the entity name based on the most common entity type abbreviations in Mexico.

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Contact Fonoa

Agustín Trevisiol
Tax Researcher

Agustin is an International Tax Lawyer and specialist in cross-border digital transactions. He has worked with VAT, GST, and DST in over 90 countries on all five continents. Over those jurisdictions, he has been handling registration thresholds and procedures, invoicing requirements, compliance, return submission, and tax remittance. With that respect, he has been providing assistance and advisory to many leading firms in the digital economy, especially in online education, video games, and fintech.