Tax Stimulus in the Field of Hydrocarbons

Since December 2019, oil prices in international markets have fallen more than 70% of their value, which translates into lower revenues from hydrocarbon sales. For this reason, in December 2019, amendments to the Hydrocarbon Income Law were published in the Official Gazette of the Federation, which amended articles 39, first paragraph and 42, first paragraph in relation to the Assignees. On Tuesday, April 21, 2020, a decree was published in the Official Gazette of the Federation in which it temporarily modifies these legal provisions from the above, and grants a tax stimulus.

 

Core of the Stimulus

The tax stimulus is granted to the Assignees obligated to pay the shared profit for hydrocarbons and is consistent in a credit equivalent to the result of multiplying 28% to the difference resulting from decreasing the value of the hydrocarbons extracted during the tax year in question. It includes the consumption of these products and losses due to spills or burns. The stimulus will be creditable against the utility right following the terms stated in the Hydrocarbon Income Law.

 

Annual Payment

The stimulus may not exceed:

  • The amount to be paid in the fiscal year. Once the provisional payments actually paid for the rights for the tax year 2020 have been credited and the corresponding balances have been compensated.
  • Of the amount of 65 billion Mexican pesos.

 

In addition to the foregoing, a complementary stimulus is granted to the Assignees who make the monthly provisional payments, consisting of a tax credit equivalent to the result of multiplying 28% to the difference resulting from decreasing the value of the hydrocarbons extracted from the beginning of the year and until the last day corresponding to the payment, the amount of the deductions, being creditable against the provisional payments to be reported for the year 2020.

 

Monthly Payments

The stimulus may not exceed:

  • The amount to be paid in the period in question, having credited provisional payments paid and offsetting the balances in favor that proceed.
  • The amount resulting from multiplying the number of months that comprise the period in question by the quotient of dividing 65 billion pesos by 12.
  • The fiscal stimulus will be applicable for the fiscal year 2020 and will not give rise to return or constitute accumulative income for fiscal purposes.
  • The decree will be in force until December 31, 2020.

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