In accordance with Action 6 of the BEPS (Base Erosion and Profit Shifting) Plan, referring to the prevention of treaty abuse, in Mexico as of 2020, Article 5-A of the Federal Fiscal Code (CFF) was added to implement its general anti-abuse rule, which in conjunction with other procedures is used to disregard and disregard the tax effects of operations in which the use of deception or taking advantage of errors in the legislation or the non-application of a legal norm is attempted, justifying itself in another to reduce or eliminate the payment of contributions, for tax evasion and/or avoidance.
Objective of the General Anti-Abuse Rule in Mexico
In Mexico, the rule of article 5-A of the CFF seeks to prevent taxpayers' operations that do not have a business purpose from generating a tax benefit, so it is necessary to demonstrate that the economic benefit expected or obtained is greater than the tax benefit, as well as the justification and necessity of carrying out the operation in question, considering its economic utility in the generation of income, reduction of costs, increase in the value of the assets owned by the taxpayer, improvement of its position in the market and the development of relationships with customers and suppliers.
On the other hand, as of the 2022 tax reform in Mexico, the business rationale was established as an indispensable requirement in financing transactions deriving from carried interests, mergers or spin-offs of companies and corporate restructurings.
However, the application of the anti-abuse clause is only originated by the tax authorities in the exercise of their powers of verification through home visits, desk reviews and electronic reviews, so it is not applicable in management powers, audit planning, surveillance, assistance and control, such as, for example, letters of invitation or e-mails sent by the tax authority.
Integration of the Collegiate Reviewing Body
Within the procedure for the application of the anti-abuse of business reason clause, once the verification powers are initiated, the tax authority, based on the facts and circumstances of the taxpayer recognized under such powers, as well as the evaluation of the elements, information and documentation obtained during such powers, must send the case for review to a collegiate body, which had not been materially integrated until January 1, 2023, by means of rule 2.1.52. of the Miscellaneous Tax Resolution for the fiscal year 2023 (RMF), which establishes the integration of the collegiate body and its rules of operation, in order for such body, in the cases it is aware of, to issue a favorable opinion for the application of the anti-abuse rule. If the opinion of the collegiate body is not received within a period of 2 months from the presentation of the case by the tax authority, it will be understood to be negative.
This collegiate body will be composed of a Coordinator, as chairman of the meetings, who in turn must appoint a Technical Secretary and an Assistant Secretary; On the other hand, the heads of the Tax Legislation Unit, the Tax Revenue Policy Unit, the Federal Tax Legislation and Consultation Sub-Administration, the General Administration of Federal Tax Audit, the Decentralized Administration of Tax Audit, the General Administration of Large Taxpayers, the General Administration of Hydrocarbons, the General Administration of Foreign Trade Audit, the General Administration of Foreign Trade Audit, and the General Administration of Tax Administration and Consultation will be part of the body, with voice and vote, General Administration of Hydrocarbons, General Administration of Foreign Trade Auditing and General Legal Administration, having as a minimum quorum to meet shall be integrated with the attendance of at least 5 of the heads of the above mentioned administrative units and the Coordinator or his alternate. The opinion of the collegiate body shall be formed with the vote of more than half of the officials present.
Conclusions
It is evident that for the fiscal year 2023 the tax authorities intend to exercise their verification powers by reviewing whether the taxpayers' operations have or lack business reason, therefore, in order to avoid contingencies, in which the tax effects of an operation are not recognized or it is re-characterized, it should not be lost sight of the fact that at the end of the day, there is already a body in charge of the business reason opinion, as well as the fact that such business reason is a tax requirement of the operations and that even if the operations are or are not subject to the opinion of the collegiate body, the tax authorities must integrate the opinion of the tax authorities, There is already a body in charge of the business reason opinion, as well as the fact that said business reason is a tax requirement of the operations and that even though the operations may or may not be subject to the opinion of the collegiate body, a file of evidence must be integrated to prove the before, during and after of any operation and demonstrate both its business reason and its materiality or effective realization.
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