How are expenses processed and reimbursed in Mexico?

This guide provides a clear and straightforward overview of how to submit and approve business expenses in Mexico. It is designed to help you navigate the process efficiently, ensuring compliance with company policies and Mexican tax regulations.

1. Submitting Expense Claims

Submission Timeline:
Expenses must be submitted and approved within the same calendar month in which they were incurred. For example, if an invoice is dated July 25, 2024, it needs to be submitted and approved by August 5, 2024.
Approval Deadline:
To meet local accounting requirements, ensure that all expense reports are submitted and approved by the 5th of the following month.

2. Reimbursement Process

Reimbursement Schedule:
Approved expenses will be reimbursed within the same month as the payroll cycle. For instance, if an expense is approved by August 5, 2024, the reimbursement will occur during the second payroll cycle of August 2024.

3. Payment Methods

Invoices Over $2,000 MXP:
These should be paid using a credit or debit card, rather than cash.
Fuel Payments:
All fuel purchases must be made with a credit or debit card, regardless of the amount.
Submitting Vouchers:
When paying with a credit or debit card, always include the payment voucher with your expense report.

4. Tax Deductibility Requirements

Invoice Issuance:
All business-related invoices must be issued to Horizons GT Mexico S. de R.L. de C.V., not to the individual employee. This applies to expenses like phone bills, insurance, and similar costs.
Tax Receipt Requirements (for Mexican Expenses):
- Obtain an electronic invoice (CFDI).
- Ensure the invoice includes the RFC (Tax ID) of both the issuer and Horizons GT Mexico.
- Include the folio number, SAT digital seal, and the place and date of issue.
- Detail the quantity, unit of measurement, type of goods or services, and the total amount.
Tax Receipt Requirements (for International Expenses):
- The invoice should include the name, address, and tax identification number (or its equivalent) of the foreign issuer.
- Include the RFC or full name “HORIZONS GT MEXICO.”
- State the transaction amount in numbers or letters.
- Specify the quantity, unit value, and description of goods, if applicable.
Non-Deductible Expenses:
- Expenses for consumption in bars.
- Restaurant expenses within 50 km of Mexico City (91.5% of these are non-deductible).
- Purchases of gifts not intended for all clients.
- Fines.

5. Important Considerations

Grossing Up:
If an expense does not meet the required standards, it may be classified as income and subjected to a gross-up of 30%-40% on the employer's payroll, leading to higher costs.

6. Legal References

These processes are in line with the following regulations:

Article 29 CFF, Requirements for Tax Receipts
Article 27 LISR, Requirements for Deductions
Rule 2.7.1.14 RFM, Tax Receipts Issued by Foreign Residents

By adhering to these guidelines, you can ensure that your expense reports are processed smoothly, in compliance with Mexican laws, and without incurring unnecessary additional costs.

If you still have pending questions, please contact [email protected] and we are happy to support you. Alternatively, take a look at the below attachment for a more detailed overview.

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