Economic Package 728 450 brouoadmin

Economic Package

ECONOMIC PACKAGE

Tax Reform 2022

On Friday 12 November 2021, the Fiscal Reform for the fiscal year 2022 was officially published in the Evening Section of the Official Gazette of the Federation, which, in general terms, will come into effect on 1 January 2022.

As we had informed you, this reform was presented by the Federal Executive on 8 September and was approved without observations or changes by the Finance and Public Credit Commission of the Chambers of Deputies and Senators on 18 and 26 October, despite the fact that several reservations to the project were promoted.

The publications made by the Executive are:

  • DECREE enacting the Federal Revenue Law for the Fiscal Year 2022;
  • DECREE amending, adding and repealing various provisions of the Federal Law on Duties; and
  • DECREE amending, adding and repealing various provisions of the Income Tax Law, the Value Added Tax Law, the Law on the Special Tax on Production and Services, the Federal Law on the Tax on New Automobiles, the Federal Fiscal Code and other laws.

The objectives of the reform are, among others:

  • Establish control and simplification rules
  • Combating tax evasion and avoidance
  • Strengthening public finances
  • Formalising the economy
  • Increasing the taxpayer base
  • Do not increase or create new taxes

It is important to mention that, although the objective of not increasing or creating new taxes is achieved, the reality is that the reform implies an increase in administrative and control burdens, as well as an increase in the number of taxes levied.

The tax authorities are granted greater and stricter powers of control by increasing requirements and obligations, limiting benefits, deductions and credits, as well as applying measures that force taxpayers to comply almost coercively.

The following are the highlights of the Tax Reform in terms of the Fiscal Miscellaneous, which includes the Income Tax Law (LISR), Value Added Tax (LIVA), Production and Services Tax (LIEPS), New Car Tax (LISAN), and the Federal Fiscal Code (CFF).

Income Tax Law (LISR)

Simplified Trust Regime for Individuals:

  • It is a new regime applicable and optional for individuals who have income of less than $3.5 million pesos and who only carry out business or professional activities or grant the temporary use or enjoyment of goods, even if they also obtain income from salaries and interest, including individuals who are currently taxed under the tax incorporation regime, so that individuals in these regimes will migrate to the new simplified trust regime, as these regimes are eliminated.
  • Individual taxpayers who are exclusively engaged in, or who derive 100% of their income from, agricultural, livestock, forestry or fishing activities, when the amount of their income in the tax year in question does not exceed $300,000 and when the income exceeds this amount and up to $3'500,000, ISR must be paid on the total income received under the business activities regime}.
  • The tax is levied at progressive minimum rates ranging from 1% to 2.5% on the amount of income earned per year.
  • The requirements are minimal, while the main obligations are to submit monthly payments and annual returns, considering only the CFDI's that cover their activities, without including VAT and without applying any deductions; however, no informative declarations must be submitted and no electronic accounting must be kept.
  • It is not applicable to individuals who are partners, shareholders or members of legal entities or when they are related parties, are residents abroad who have one or more permanent establishments in the country, have income subject to preferential tax regimes, receive income treated as wages.
  • A transitional period will be granted for proper implementation and compliance.

Simplified Trust Regime for Legal Entities:

  • It will apply to legal entities resident in Mexico, newly incorporated and by individuals (resident in Mexico or abroad) whose total income does not exceed $35 million pesos in the fiscal year.
  • This regime replaces the tax incentive regime of accrual of income based on cash flow, which is eliminated, but technically is transferred to this new simplified regime of trust for legal entities. Therefore, this regime allows the accrual of income and deduction of expenditures to occur until they are actually received and paid (cash flow), so no provisional returns will be made using the profit ratio obtained from their annual return for the previous tax year.
  • It does not apply to legal entities whose partners and shareholders have control in other companies or when they are related parties; nor does it apply to taxpayers that carry out activities through trusts or joint ventures, financial institutions and auxiliary credit institutions, non-profit legal entities.
  • The obligation to make provisional payments and annual tax returns at the rate of 30% is established, allowing the crediting of withholdings, as well as provisional payments. Most deductions are applicable, except for the cost of sales and bad debts.
  • For the fulfilment of requirements and obligations, some of the general regime will apply.
  • Transitional arrangements will apply to ensure the correct application of this new regime.

 

Other ISR Modifications

  • Exchange Rate Fluctuation: Establish a parameter for the gain accrued from exchange rate fluctuation, preventing taxpayers from determining less income than they would obtain considering the exchange rate for settling foreign currency denominated obligations payable in the country established by the Bank of Mexico.
  • Credits against Annual Income Tax: Establish that, against the annual tax calculated, the following credits may be made, in that order: a) The amount of the provisional payments made during the calendar year b) The amount of income tax paid abroad.
  • Backed Credits: Consider as backed credits those financing transactions from which interest is payable and such transactions do not have a business rationale.
  • Authorisation of Lower Profit Coefficient: Clarify that, in provisional payments with a lower coefficient, the respective authorisation refers to the profit coefficient and not to the decrease in provisional payments deriving from the variation of such coefficient. In addition, it is included that in the event that the provisional payment has been paid in an amount lower than the corresponding amount, the corresponding complementary return must be filed in order to cover the omitted amounts, with the respective updating and surcharges.
  • Usufruct: Consider as cumulative income the value of the usufructuary right that

is determined, at the time when the bare ownership and usufruct of a property is consolidated. In this regard, notaries, brokers, judges and other notary publics must inform the tax authority of the characteristics of the operation to dismember the property and the details of the taxpayer who acquired the bare ownership.

  • Determine the gain on the disposal of the bare ownership of an asset by subtracting from the price obtained the original amount of the investment in the proportion of the price that corresponds to the transferred attribute.
  • Specify that the usufruct constitutes a fixed asset to which the 5% investment rate is applicable when it is constituted on immovable property.
  • Restructuring of companies: Specify that the authorisations granted by the tax authority for the disposal of shares at tax cost in cases of restructuring of companies incorporated in Mexico will only be granted to Mexican resident companies belonging to the same group. Additional requirements are also established, where the restructuring has a business rationale, the relevant operations of the last 5 years are indicated and a report is submitted by a registered public accountant indicating: the adjusted proven acquisition cost of the shares; the book value of the shares; the organisation chart of the group; percentage of equity ownership; direct and indirect shareholding; business segments and lines of business; and that the consolidation of financial statements is certified; among others.

Personal Deductions: The total amount of deductions is limited and may not exceed the lesser of 5 times the annual value of the Unidad de Medida y Actualizacion (UMA), (approximately $163,467.00) (annual value of UMA in 2021 $32,693.4 pesos; this value will change for the 2022 fiscal year) or of the

  • 15% of the taxpayer's total income, including donations. However, the current deduction limit of 10% is maintained separately for supplementary contributions made directly to the supplementary retirement contributions sub-account, to personal retirement plan accounts, or to voluntary contributions made to the voluntary contributions sub-account.
  • Deductions in General
  • Operations related to hydrocarbons and petroleum products: Require as a requirement for deductibility in operations related to hydrocarbons and petroleum products, to declare the information of the permit issued by the Energy Regulatory Commission or the Ministry of Energy to the supplier of the fuel. The deductibility requirement is subject to the declared permit being in force and not suspended.
  • Technical Assistance, Technology Transfer or Royalties: Eliminate the deductibility of payments for technical assistance, technology transfer or royalties, when the payments are made to residents in Mexico and the contract has agreed that the service would be provided by a third party, except in the case of the provision of specialised services or the execution of specialised works.
  • Bad debts: Establish as a requirement for the deductibility of bad debts, that it is notoriously impossible to collect the debts until such time as the taxpayer has exhausted the legal means to obtain collection and that, even if entitled to collection, it was not possible to recover them.

Thin Capitalisation: In the deduction of interest, it must be demonstrated that the stockholders' equity balance is congruent with the balances

  • of the CUCA, CUFIN, CUFINRE accounts and losses pending reduction, thus preventing taxpayers from being able to deduct more interest than they would legally be entitled to because they do not fall under the thin capitalisation hypothesis. Likewise, tax losses pending reduction that have not been considered in the determination of the tax result are included in the items for calculating the accounting capital for the year, thus considering all tax attributes in the calculation .

Clarify that individuals who only provide services under a contract entered into with persons holding permits, authorisations, contracts, concessions, among others, that allow the performance of activities related to strategic areas for the country or for the generation of electricity, have never been able to deduct interest accrued on debts contracted with their related parties resident abroad, so taxpayers indebted for performing such activities with strategic areas for the country, must prove that they are assignees or contractors or that they can perform such activities on their own account.

Non-regulated multiple purpose financial companies (SOFOMES ENR) that, in order to achieve their corporate purpose, carry out activities mainly with their domestic or foreign related parties, may not apply the exception of not including among their interest-bearing debts for the calculation of the amount in excess of three times their stockholders' equity, those contracted by members of the financial system in the performance of the operations that are part of their corporate purpose.

  • Investments:
  • Original Amount of Investment: Clarify that the original amount of the investment includes the expenses for the physical location, installation, assembly, handling, delivery, as well as those related to the contracted services.
  • Notice of Non-Useful Assets: Re-establish the obligation of legal entities to file the notice with respect to assets that are no longer useful for generating income.
  • Financial System:
  • The institutions of the financial system must submit monthly, instead of annually, the informative declaration of cash deposits made in accounts opened in the name of taxpayers.
  • Consider as a stock exchange not only the Mexican Stock Exchange, but any public limited company that obtains the corresponding concession title granted by the Ministry of Finance and Public Credit.
  • Spin-off and Tax Losses: Establish that taxpayers that carry out spin-offs must and may divide losses only when the spin-off and spun-off companies are engaged in the same line of business.

Change of Shareholders: To consider that there is also a change of partners or shareholders who have control of the company, in one or more acts carried out within a period of 3 years, counted from the time a merger takes place, when in addition to the change of the holders, directly or indirectly, of more than 50% of the shares or parts of the company with voting rights, the direct or indirect holders of the rights to impose decisions in the meetings, to direct the administration, the management, the management of the company, the management of the company or the shareholders of the company change.

  • strategy or major policies of the company in any other form and when, after the merger, the company and its legal entity partner cease to consolidate their financial statements.

 

  • Notices of Share Transfers between Residents Abroad: Legal entities resident in Mexico that are the issuers of the shares transferred by residents abroad without a permanent establishment in the country will be jointly and severally liable for the taxes corresponding to the transfer, and must therefore submit the notice of such transfer the month following the date on which the transaction occurs, indicating the name or company name of the foreign residents, country of residence, as well as the amount and date of payment of the tax.
  • Net Tax Profit: To clarify that the PTU of companies is not a concept that has to be subtracted for the determination of the net tax profit.
  • Individuals with Rental Income: Taxpayers who grant the temporary use or enjoyment of goods must keep electronic accounting.
  • Personal Retirement Plans and Supplementary Retirement Contributions: Include as institutions to manage personal retirement plans the comprehensive investment fund share companies, provided that they obtain prior authorisation from the Tax Administration Service and meet the requirements and conditions to maintain their validity.
  • Related Party Transactions:

Eliminate references to related parties resident abroad, given that the definition of related parties in the Law is applicable to related parties resident in the country and those resident abroad, therefore, the obligations for legal entities with operations with related parties are not applicable to related parties resident in the country and those resident abroad, and therefore, the obligations for legal entities with operations with related parties are not applicable to related parties resident in the country.

  • The definition of a related party transaction is applicable to transactions with domestic and foreign parties.
  • Homologate the compliance date for the filing of the informative declaration and the local informative declaration of related parties, with the filing of the tax report, to 15 May of each year.
  • The new law would apply the arm's length or arm's length principle to foreign residents subject to ISR, stating that they are obliged to determine income, profits, gains and, if applicable, deductions derived from transactions with related parties, considering the prices, amounts of consideration, or profit margins that they would have used or obtained with or between independent parties in comparable transactions.
  • Residents Abroad:
  • Acquisition of Property: When there is a difference of more than 10% with respect to the consideration agreed in the purchase and sale of real estate, the transferor (resident in Mexico or permanent establishment in the country) will be obliged to pay the tax and will replace the foreign resident in this obligation.
  • Sale of Shares: In transactions involving the sale of shares between related parties, where it is opted to pay tax on the gain or profit from the sale, in addition to the submission of an opinion, the transfer pricing study demonstrating the market value of the disposal of shares or securities representing ownership of assets must be included.

It is further specified that, in cases of group restructuring, shares shall be deemed to be outside the group.

when the issuing company and the company acquiring the shares cease to consolidate their financial statements in accordance with the provisions governing the taxpayer in accounting and financial matters, or which it is obliged to apply, in order for taxpayers to make the deferred tax payment.

It is also specified that this benefit will be applicable when the requirements are met and the respective authorisation is in place, including the restructuring or, as the case may be, the relevant transactions related to such restructuring have a business reason and the share exchange has not generated income subject to a preferential tax regime.

A transitional provision establishes that taxpayers who, as of 31 December 2021, have obtained an authorisation in force to defer payment of income tax, must inform the tax authority of the relevant transactions they carry out as of 1 January 2021.

  • Reduced Rates on Interest Withholding: The Law states that the reduced rates of 10% and 4.9% will not be applicable in the respective cases, when the beneficial owners receive more than 5% of the interest derived from the securities in question. However, given that in some cases these reduced rates are applied without considering the applicable limitations, because the interest is not derived from debt securities, the reference to "interest derived from debt securities" is eliminated, so that the limitation to apply the reduced rates applies to any transaction that gives rise to the payment of interest, as there is no reason to make a distinction in terms of transactions that do or do not derive from debt securities.
  • Compensation for Damages: It is included that when judgments or arbitration awards condemn a payment without indicating whether it is compensation for damages, the payer must make the withholding on the total income, leaving the burden of proof on the foreign resident receiving such income so that, at the time of requesting a refund of the tax withheld in excess, he can prove to the tax authorities the nature of the payment he has received and thus determine the appropriate tax treatment.
  • Legal Representation: Legal representatives of residents abroad must voluntarily assume joint and several liability for the payment of the tax incurred by the resident abroad, as well as include the requirement that the appointed representative be solvent. That is, he/she must have sufficient assets to ensure compliance with the substantive tax obligation.
  • Preferential Tax Regimes (REFIPRE)
  • It is established to change the name of Title VI of the respective Law, including related party transactions: "OF CONTROLLED FOREIGN ENTITIES SUBJECT TO PREFERENTIAL TAX REGIMES AND, OF MULTINATIONAL COMPANIES AND RELATED PARTY TRANSACTIONS".

It is established that rules related to inflationary adjustment and exchange rate effects referring to the Mexican peso have never been directed to income obtained abroad under a preferential tax regime, and therefore, such rules should not be taken into account when determining income tax.

  • Mexican taxpayer, for purposes of comparison with the tax actually paid in Mexico or to determine the tax result of the foreign entity subject to the provisions of REFIPRES.
  • Multinational Enterprises and Related Party Transactions:
  • Only information from comparable transactions for the financial year under review should be considered. However, where the business cycles or commercial acceptance of a taxpayer's product cover more than one financial year, comparable transactions from 2 more financial years, earlier or later, may be considered.
  • The ranges of prices, amounts of consideration or profit margins, when there are two or more comparable transactions, shall be adjusted by applying the inter-quartile method established in the Regulations of the Law, the method agreed in the framework of a friendly procedure indicated in the treaties to avoid double taxation, to which Mexico is a party, or the method authorised in accordance with the general rules issued for this purpose by the Tax Administration Service.
  • Maquiladoras:

Eliminate the obligation to present the written statement by which maquiladora companies declare to the tax authority that the tax profit for the year represented at least the greater of 6.9% of the total assets used or 6.5% of the total amount of operating costs and expenses ( Safe Harbor method), leaving in force only the

  • obligation to file the information return for manufacturing, maquiladora and export services companies (DIEMSE), which must show the calculation of the tax profit in accordance with the Safe Harbor method and the data taken into account for this purpose.
  • Eliminate the possibility for maquiladoras to obtain a private ruling from the tax authority confirming compliance with their transfer pricing obligations.
  • Tax Incentives: In the tax incentives granted to film production projects, theatrical, visual arts, dance, artistic, research and technological development, high performance sports, and investments for electric vehicles, in which taxpayers apply a tax credit equivalent to the total or partial amount of the contribution, expenditure or investment they have made in the project, as applicable in each case, against the income tax incurred in the fiscal year and/or provisional payments, it is established that the difference of the applicable tax credit may be credited against the resulting tax incurred, after deducting the corresponding provisional payments, as well as the creditable tax.

Value Added Tax Law (LIVA)

  • Animal Feedstuffs: Apply the 0% rate to products intended for human and animal feedstuffs, retaining the exceptions currently established in the LIVA.
  • Menstrual Hygiene Products: Establish that the above-mentioned hygiene products are subject to VAT at the rate of 0%.
  • VAT crediting: Expressly establish as a requirement for import VAT crediting that the customs declaration must be in the name of the taxpayer who intends to credit the tax paid on the import.
  • Non-crediting of VAT: Establish that the concept of activities not subject to the tax, includes the assumptions of those acts that are not considered to be carried out in national territory, as well as those carried out in national territory that do not fall within the assumptions of taxed activities, for which income is obtained or consideration is charged and that, for their performance, expenses and investments in which VAT is transferred to the taxpayer are indistinctly allocated, in order to be clear that the creditable VAT should only be related to expenses and investments that are allocated to the performance of taxed activities.
  • Pre-operational period: Establish that, in order to correctly determine the VAT credit adjustment in the pre-operational period, the taxpayer must inform the tax authority of the month in which it starts its activities for VAT purposes, in accordance with the general rules issued for this purpose by the Tax Administration Service.
  • Digital Services: Establish that the provision of information on the number of services or operations carried out with recipients located in national territory will be monthly and not quarterly.
  • Temporary Use or Enjoyment of Tangible Goods: Clarify that the temporary use or enjoyment of goods in national territory is subject to the payment of VAT, regardless of the place where the material delivery of the goods that will be the object of the temporary use or enjoyment takes place.

Federal Fiscal Code (CFF)

  • Residents in Mexico: Unless proven otherwise, individuals of Mexican nationality are presumed to be residents of Mexico, so that the status of resident in Mexico will not be lost if the individual does not prove such change or does not submit a notice of change of residence. Likewise, the term for maintaining the status of resident in Mexico of individuals or companies that change their tax residence to a country or territory with a preferential tax regime is extended from 3 to 5 years.
  • Suspension of Deadlines due to Force Majeure or Fortuitous Event: The proposal is to specify the power of the tax authorities to suspend, by means of general rules, the deadlines set out in the tax provisions, including those relating to compliance with obligations and the exercise of powers, when there is force majeure or fortuitous event.
  • Mergers and Demergers:
  • It is specified that the transfer to be made in a division is that of the share capital, in order to prevent divisions being made to transfer losses without transferring a minimum amount of share capital.
  • Mergers and demergers without a business purpose shall be considered as a disposal, considering for such purposes the relevant transactions carried out within the 5 years immediately preceding and following their completion.
  • Relevant transactions to be considered are any act, regardless of the legal form used, whereby:

Transfer of ownership, enjoyment or use of shares or of voting or veto rights in decisions of the merging company, of the merging company, of the

  • the acquirer, of the spun-off company or companies, or of the favourable vote necessary for the taking of such decisions.
  • Granting of the right to the assets or profits of the merging company, the transferor, the transferee(s) in the event of any kind of capital reduction or liquidation.
  • Decrease or increase of more than 30% in the book value of the shares of the merging, demerging, demerging or demerged company or companies, in relation to the determined value of these at the date of the merger or demerger of companies, which was recorded in the respective report.
  • Decrease or increase in the share capital of the merging, divisor, divided or divided company or companies, based on that stated in the report.
  • A partner or shareholder who received shares by virtue of the merger or division increases or decreases his or her percentage interest in the share capital of the merging, divisor, divided or spun-off company, and as a result increases or decreases the percentage interest of another partner or shareholder of the merging, divisor, divided or spun-off company, taking as a basis the percentages of interest in the share capital of such partners or shareholders as stated in the opinion.
  • Change of the tax residence of the partners or shareholders who received shares of the merging, divisional, spun-off or spun-up company, or of the merging, divisional, spun-off or spun-up company, as stated in the opinion.
  • Transfer of one or more segments of the business of the merging, divisor, divided or spun-off company(ies), as identified in the opinion.
  • Image Right with the Tax Treatment of Royalties: Consider the concept of the use or concession of use of a copyright on a literary, artistic or scientific work to include the right to the image, applying the tax treatment of royalties to the taxable income resulting from the exploitation of the copyright inherent to the image itself.
  • Advanced Electronic Signature or Digital Seal Certificate (CSD) for Legal Entities with Partners or Shareholders in Irregular Tax Situation: Deny the advanced electronic signature or, if applicable, the CSD when a partner or shareholder who has effective control of the legal entity requesting the procedure, has restricted digital seals or is listed for carrying out non-existent operations, without having corrected his or her tax situation. Or when the legal entity of which it is a partner is found to have such irregularities.
  • Cancellation of CSD: It is established that when the authority's procedures followed for the cancellation of CSD are exhausted or concluded, it will only notify the resolution relating to such cancellation. Likewise, when the tax authority has issued a resolution in which it resolves the merits of the matter, taxpayers may only carry out the procedure to obtain a new certificate, provided that they previously correct their tax situation. On the other hand, it is established not to limit tax secrecy for some cases of CSD cancellation.
  • Restriction of CSDs:

Simplified Trust Regime: When individuals under the simplified trust regime fail to make 3 or more consecutive monthly payments.

or not, of the tax or of the annual return.

  • Resistance to the Verification of their Tax Obligations: When taxpayers repeatedly fail to cooperate during the exercise of the verification powers and have been fined for such reluctance.
  • Materiality of the Transactions Covered by Tax Receipts: When the taxpayer does not go before the tax authority to prove that he/she entered into the transactions with those who are definitively in a process of non-existent transactions, even when there is no liquidation or proceeding.
  • Inconsistencies: When the income declared, as well as the tax withheld by the taxpayer, stated in the provisional, withholding, final or annual tax returns, do not match the value of the taxable acts or activities declared in the provisional or final tax returns for the year, or the informative returns, in relation to the information held by the Tax Administration Service.
  • Irregular Partners: When a partner or shareholder who has effective control of the legal entity has restricted his or her digital stamps or is listed for carrying out non-existent operations, without having corrected his or her tax situation.
  • When the taxpayer does notrespond to the authority's request and the request for clarification is deemed not to have been filed, the 40-day period will continue to run as if the clarification had not been filed, and the use of the CSD will be restricted.

 

Electronic means: A digital document with an advanced electronic signature or digital seal will be verified not only by the remission of the original document with the author's public key through mechanisms to be determined by rules of character.

The Commission has also developed a general framework to enable the use of innovative tools for the validation of documents.

  • Returns:
  • Time limits: Periods of time between the issuance of a request and its full reply shall not be taken into account in calculating the time limit for the return.
  • No Amount Limit: The income limit for filing tax refund requests in electronic format is eliminated, so all refund requests must be filed in electronic format.
  • Self-correction through the Offset of Tax Credits: An option is established so that, as of January 2023, taxpayers who are subject to the exercise of verification powers can correct their tax situation by applying the amounts they are entitled to receive from the tax authorities for any concept against the omitted taxes and their accessories, as determined by the tax authority; this, even when different taxes are involved. In other words, the universal offsetting of credit balances will only apply when it is applied to correct the tax situation. For such purposes, it is established that the taxpayer must submit a request to the tax authority, which will decide and notify the taxpayer of the amount of the credit balance accepted for the correction, which in turn may be totally or partially accepted or rejected by the taxpayer. It is important to mention that no right to a refund or compensation will be generated in the event that the taxpayer does not accept the application of the credit balance, or in the event that such amount is greater than the credit determined by the authority.

The amounts in favour of the taxpayer resulting from an administrative appeal decision or a judgment issued by an administrative body shall not be eligible for application.

jurisdictional. Likewise, the acts issued by the tax authority in this process cannot be challenged.

  • Joint and several liability: It establishes the cases in which there is acquisition of negotiations, and joint and several liability applies.
  • RFC:
  • It is established that individuals from the age of 18 who reach the age of majority must register with the RFC, however, the registration will be carried out as "registration of individuals without economic activity", so that the registration will not generate tax obligations or give rise to the payment of taxes or penalties.
  • The authority is empowered to cancel or suspend the RFC registration when it detects that in the last 5 years the taxpayer has not carried out any activity, has not issued tax receipts, has no outstanding obligations to fulfil, or there is proof of death.
  • For the cancellation of the RFC, a positive opinion on compliance with tax obligations in the area of social security is required.
  • CFDIs:
  • Free Export: The exporter is obliged to issue the CFDI for exports of goods that are not sold or whose sale is free of charge.
  • Publication of Complements: It is specified that the publication of CFDI complements in electronic media is on the website of the Tax Administration Service.

CFDI Certification Providers: The authorisation and

operation of CFDI certification providers.

  • CFDI's of Expenses: CFDI's that do not have the necessary supporting documentation cannot be deducted from the taxpayer's income with CFDI's of expenses, but must be cancelled.
  • Inconsistencies of Description and Economic Activity: When the information corresponding to the service, goods, merchandise or use or enjoyment indicated in the CFDI does not coincide with the economic activity registered in the RFC, the authority will proceed to update the taxpayer's economic activity in the register.
  • Cancellation of CFDIs: In order for taxpayers to be able to cancel CFDIs, they must prove and justify that said receipts were in fact defective in their issuance, being able to prove to the tax authority that said cancellation is justified.
  • Exchange of Information: The information and documentation of residents abroad and of the Standard for the Automatic Exchange of Financial Account Information in Tax Matters shall be retained for a period of 6 years from the date on which the respective information or documentation was generated or should have been generated, or from the date on which the related returns were filed or should have been filed, as the case may be.
  • Relevant Transactions: Included in the information that taxpayers must submit on relevant transactions is that relating to relevant merger and spin-off transactions, restructuring of companies, and disposal of shares.

Dictamen Fiscal: It is compulsory for legal entities under the general regime that in the last fiscal year declared have included in their normal tax declarations accumulable income for the purposes of the

  • income tax equal to or greater than an amount equivalent to $1,650,490,600.00 MXN, as well as those that at the close of the immediately preceding fiscal year have shares placed among the general investor public on the stock exchange. Taxpayers who choose to have their financial statements audited will declare it when filing the income tax return for the fiscal year corresponding to the fiscal year for which the option is exercised. On the other hand, it is established that the filing of the report must be made by 15 May of each year.

Taxpayers that are related parties of those who are obliged to report their financial statements, submit information on their tax situation.

Likewise, it is established that registered public accountants who, when preparing the opinion on the financial statements, were aware that the taxpayer had engaged in conduct that could constitute an offence, without having informed the tax authority, and subsequently criminal proceedings were brought in respect of such conduct, will be liable for concealment of tax offences.

  • Controlling Beneficial Owner: A controlling beneficial owner is defined as a natural person or groups of natural persons who effectively control or benefit economically from a legal person or legal entity by holding a significant percentage of the entity's shares, or such percentage represents a significant share of the voting rights or the ability to appoint or remove members of the entity's management.

It establishes the obligation for legal entities, trustees, settlors or trustees, in the case of trusts, as well as the contracting parties or members, in the case of any other legal entity, to obtain and keep, as part of their accounting and to provide the Administration Service with the following information

Tax Authorities, the information relating to its controlling beneficiaries in a reliable, complete and updated form. Likewise, a positive opinion of compliance must be obtained if all the obligations related to the figure of the controlling beneficiary are observed.

It establishes the power for desk reviews, aimed at the subject matter of controlling beneficiary and automatic exchange of financial information.

  • Declarations and Voluntary Compliance: In order to benefit from the best international practices in the field of voluntary and cooperative compliance, the Tax Administration Service will implement the international compliance certainty programme, as well as to establish tax certainty and dispute prevention programmes. In this regard, the international compliance certainty programme is a multilateral project in which different tax administrations initially participated in January 2018, with the aim of conducting a risk analysis on the financial and tax information of multinational groups.
  • Appraisals: The tax authorities may carry out appraisals of intangible assets or in respect of income received for services, as well as when a presumptive profit is determined in the case of intangible assets involved in the sale or acquisition of goods whose price was agreed at below-market values between independent parties. This power to carry out appraisals is different from the appraisals that the authority orders to be carried out.

Simulation of Legal Acts for Tax Purposes: The aim is to incorporate the power for the tax authorities, in the exercise of their powers of verification, to determine the simulation of legal acts, exclusively for tax purposes, duly founded and

  • The taxable event shall be the taxable event, motivated within the verification procedure and declared to exist in the very act of determination of the tax situation of the taxpayer, provided that it is a matter of transactions between related parties. In legal acts in which there is simulation, the taxable event taxed shall be the one actually carried out by the parties.
  • Confidentiality in Desk Reviews: It is envisaged to include for desk reviews the procedure to disclose to the taxpayer and its representatives confidential information provided or obtained from independent third parties regarding comparable transactions that affect the competitive position of such third parties, which is currently only established for when a home visit is carried out. Access to this information will only be for the purpose of the taxpayer correcting its tax situation, disproving facts or omissions or challenging the resolution that determines the tax credit. The above, provided that the taxpayer and his representatives sign the confidentiality document.
  • Conclusive Agreements: Conclusive agreement procedures should last no longer than 12 months from the date of the request.
  • Reductions of Fines: The reductions shall apply provided that no dispute resolution procedure established in a double taxation avoidance treaty to which Mexico is a party has been filed.
  • Penalty Applicable to the Optional Regime for Groups of Companies: Included to penalise with a fine of 60% to 80% of the difference between the declared loss and the loss actually incurred.
  • Infringements and Fines: The infringements and penalties applicable to non-compliance with the obligations proposed in the project are established.

Law on the Special Tax on Production and Services (LIEPS)

  • Import of Automotive Fuel: Establish that when the customs or tax authority, in the exercise of its powers of verification, detects that due to the characteristics of the merchandise being introduced into national territory, this corresponds to automotive fuels in respect of which the total or partial payment of the tax has been omitted, the corresponding quota will be applied according to the type of fuel in question, without prejudice to the administrative and criminal sanctions that may be applicable.
  • Definitions Related to Alcoholic Beverages (Electronic Tag and Establishment): Establish what should be understood by electronic tag, in order to provide legal certainty on its application and establish its material and operational difference with respect to the physical tag, which is maintained. In this regard, the physical tag is provided printed and can be attached to any part of the container except for the base, while the electronic tag is provided by the authority in the authorised electronic folio, which will be printed on the label or back label of the container containing alcoholic beverages.
  • Establishment of Final Consumption: Establish a non-limiting list of places where alcoholic beverages are regularly sold for final consumption, indicating as such canteens, bars, breweries, nightclubs, cabarets, restaurants, hotels, social centres, discotheques, lunchrooms, restaurants, kermises, fairs, shows, public dances, halls, banquets, casinos, and all those where alcoholic beverages are opened for sale and final consumption.

Alcoholic Beverages for Consumption in the Same Place or Establishment where they are Sold: The authority may issue general rules to establish the cases in which taxpayers that sell to the general public alcoholic beverages for consumption in the same place or establishment in which they are sold.

  • alcoholic beverages for consumption in the same place or establishment where they are sold, may not destroy the containers that contained them immediately after their contents have been used up and use them for display. It is also established that establishments must scan the QR codes on the alcoholic beverage labels in the presence of the consumer.
  • Denatured Alcohol and Uncrystallisable Honeys: Eliminate the obligation for manufacturers, producers, bottlers and importers of denatured alcohol and uncrystallisable honeys to register in the Alcoholic Beverages Taxpayers' Register, leaving only alcohol manufacturers, producers, bottlers and importers obliged to do so.
  • Security Code Printing Service Providers: Eliminate the figure of the security code printing service provider for cigars and other manufactured tobaccos (with the exception of cigars and other manufactured tobaccos made entirely by hand) and establish that the Tax Administration Service will be in charge of generating and providing the referred codes.
  • Security Code on Cases, Packages, Wrappers or Any Other Form of Presentation: Include as an obligation for producers, manufacturers and importers of cigars and other manufactured tobaccos to print the security code on any means of presentation of their products and not limit the security codes to be requested only for printing on packets.
  • Automotive Fuel Fees: Modify the procedure for updating the fees applicable to automotive fuels to reflect anticipated inflation during 2022, in line with the General Economic Policy Criteria 2022.

For further information regarding this newsletter, please contact us:

Ricardo Quibrera Saldaña

ricardo.quibrera@ecovis.mx

Arturo Quibrera Saldaña

arturo.quibrera@ecovis.mx

Kennya Ramírez Ugalde

kennya.ramirez@ecovis.mx

Cristina Contreras García

cristina.contreras@ecovis.mx

Benjamin Segura Garcia

benjamin.segura@ecovis.mx

Monica Alcocer Jaimes

monica.alcocer@ecovis.mx

  • Armoured cars: Eliminate the special treatment for new armoured cars, determining the tax base, including the value of the material used for the armouring. Likewise, it is established that the applicable amounts in force for the fiscal year 2022, where they will be updated in January 2022, with the update factor corresponding to the period from December 2020 to December 2021 and the SHCP will publish in the DOF the update factor in the first 3 days of January 2022.

Ecovis International is a leading global consulting firm with its origins in continental Europe. It has more than 8,500 people operating in over 80 countries. Its consulting focus and core competencies are in the areas of tax consulting, accounting, auditing and legal advice.

As part of this multinational network, in Mexico, ECOVIS Quibrera Saldaña focuses on generating results in the areas of audit, tax and finance for its clients, contributing to the creation of value, expansion and protection of their assets.

Av. Guillermo González Camarena No. 1600, Piso 1, Oficinas GH, Centro de Ciudad Santa Fe, Col. Álvaro Obregón, C.P. 01210, México, CDMX.

Telephone: (55) 2591 0875

Website

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IMPORTANT NOTICE

This bulletin has been prepared by ECOVIS MEXICO (ECOVIS Quibrera Saldaña, S.C.) for its clients, for information purposes only and does not constitute professional opinion or advice, and our firm assumes no liability whatsoever for losses incurred by persons acting or refraining from acting as a result of the information contained herein.

In case you need advice in relation to individual and specific problems or any other professional assistance, we are at your service.

Anti-Money Laundering Law Criteria for REPSE Registered Contractors 2560 1440 brouoadmin

Anti-Money Laundering Law Criteria for REPSE Registered Contractors

According to the General Criteria issued by the Financial Intelligence Unit of the Ministry of Finance and Public Credit (FIU), if a company provides services to another company under the terms of b) of section XI, paragraph b) of article 17 of the Federal Law for the Federal Law for the Prevention and Identification of Operations with Resources of Illicit Origin (LFPIORPI)that is to say, that prepares for a customer o carries out carried out in the name and on behalf of a the administration and management of resources, securities or any other assets of clients, regardless of whether or not such administration includes the power to make decisions on the destination of such resources, securities or assets and the service provider merely follows the instructions of the client.the service provider must apply for registration as a Vulnerable Activity before the FIU, including those service providers registered in the Register of Specialised Service Providers or Specialised Works (REPSE) in accordance with Article 15 of the Federal Labour Law (LFT).

In this respect, it is worth mentioning that the resources, assets and securities referred to in the General Criteria in question are those defined in Article 28 of the LFPIORPI Regulation, i.e., those defined in Article 28 of the LFPIORPI Regulation. Article 28 of the LFPIORPI Regulations, i.e, coins, negotiable instruments as defined in the General Law on Negotiable Instruments and Credit Transactions, as well as the following the as well as those indicated in the Lawy del Mercado de Valoressuch as shares, shares in companies, debentures, bonds, promissory notes, bills, among others., registered or not in the National Registry of Securities.

This is important because, Since subcontracting of labour is prohibited, there is no longer any management of "human" resources, so this criterion in addition to specifying that ecompanies regon the REPSE must be registered as Vulnerable registered as Vulnerable Activities, it also updates the updates the link of companies that provide a specialised service in terms of Article 13 of the in terms of Article 13 of the LFTIn other words, only those persons or companies that, whether or not they are registered in the REPSE, will be obliged to identify operations with resources of illicit origin, will have the obligation to identify operations with resources of illicit origin. or companies that, whether or not they are registered in the REPSE provide a specialised service consisting of otherwise, the service provider will not be obliged to identify transactions with resources of illicit origin.á The service provider is not obliged to comply with the obligations of the LFPIORPI.

It is worth mentioning that the criteria published by the UIF have a guiding and informative character and do not constitute an act of authority or an interpretation in terms of the LFPIORPI, so that companies registered in the REPSE that have doubts about whether or not they should carry out the procedure of registration and registration as a Vulnerable Activity should make a formal consultation in writing before the with the requirements foreseen in the Federal Law of Administrative Procedure.

ECONOMIC PACKAGE Fiscal Reform 2022 Approved by the Chambers of Deputies and Senators 1390 782 brouoadmin

ECONOMIC PACKAGE Fiscal Reform 2022 Approved by the Chambers of Deputies and Senators

On 18 and 26 October 2021, the Chambers of Deputies and Senators, respectively, approved the Fiscal Reform Initiative for the 2022 fiscal year, which was presented by the Federal Executive last September with proposals to modify, among others, what is known as Miscelánea Fiscal, which includes the Income Tax Law (LISR), Value Added Tax (LIVA), Production and Services Tax (LIEPS), New Car Tax (LISAN), and the Federal Fiscal Code (CFF).

In this regard, the Finance and Public Credit Commission of both Chambers approved the reform initiative in general and in particular, without any adjustments or changes, i.e., they agree and consider the proposal in its entirety to be correct, without accepting any of the reservations that had been made on specific points.

However, the Chamber of Deputies considered some changes that were also approved by the Senate, so the final draft of the reform will be sent to the Executive so that it can be published in the Official Journal of the Federation and, consequently, enter into force on 1 January 2022.

In general terms, the reform establishes control and simplification rules and aims to combat tax evasion and avoidance, as well as to strengthen public finances, formalise the economy and increase the taxpayer base, without increasing or creating new taxes, which, although it is true, has also meant increasing the administrative and control burden and broadening and toughening the authorities' powers of control by increasing requirements and obligations, limiting benefits and deductions, and limiting benefits and deductions, has also implied increasing the administrative and control burden and broadening and tightening the authorities' powers of control, by increasing requirements and obligations, limiting benefits, deductions and credits, as well as indirectly applying measures that imply almost coercive compliance by taxpayers.

According to what was approved by the Chambers of Deputies and Senators, the most relevant aspects of the tax reform are the following:

Other ISR Modifications
  • Exchange Rate Fluctuation: Establish a parameter for the gain accrued from exchange rate fluctuation, preventing taxpayers from determining less income than they would obtain considering the exchange rate for settling foreign currency denominated obligations payable in the country established by the Bank of Mexico.
  • Credits against Annual Income Tax: Establish that, against the annual tax calculated, the following credits may be made, in that order: a) The amount of the provisional payments made during the calendar year b) The amount of income tax paid abroad.
  • Backed Credits: Consider as backed credits those financing transactions from which interest is payable and such transactions do not have a business rationale.
  • Authorisation of Lower Profit Coefficient: Clarify that, in provisional payments with a lower coefficient, the respective authorisation refers to the profit coefficient and not to the decrease in provisional payments deriving from the variation of such coefficient. In addition, it is included that in the event that the provisional payment has been paid in an amount lower than the corresponding amount, the corresponding complementary return must be filed in order to cover the omitted amounts, with the respective updating and surcharges.
  • Usufruct:
  • Consider as cumulative income the value of the usufruct right that is determined at the time when the bare ownership and usufruct of a property is consolidated. In this regard, notaries, brokers, judges and other notary publics must inform the tax authority of the characteristics of the property dismemberment operation and the details of the taxpayer who acquired the bare ownership.
  • Determine the gain on the disposal of the bare ownership of an asset by subtracting from the price obtained the original amount of the investment in the proportion of the price that corresponds to the transferred attribute.
  • Specify that the usufruct constitutes a fixed asset to which the 5% investment rate is applicable when it is constituted on immovable property.
  • Restructuring of companies: Specify that the authorisations granted by the tax authority for the disposal of shares at tax cost in cases of restructuring of companies incorporated in Mexico will only be granted to Mexican resident companies belonging to the same group. Additional requirements are also established, where the restructuring has a business rationale, the relevant operations of the last 5 years are indicated and a report is submitted by a registered public accountant indicating: the adjusted proven acquisition cost of the shares; the book value of the shares; the organisation chart of the group; percentage of equity ownership; direct and indirect shareholding; business segments and lines of business; and that the consolidation of financial statements is certified; among others.
  • Personal Deductions: The total amount of deductions is limited and may not exceed the lesser of 5 times the annual value of the UMA (UMA in 2021 $32,693.4 pesos) or 15% of the taxpayer's total income, including donations. However, the current deduction limit of 10% is maintained separately for complementary contributions made directly to the sub-account of complementary retirement contributions, to personal retirement plan accounts, or to voluntary contributions made to the sub-account of voluntary contributions.
  • Deductions in General
  • Operations related to hydrocarbons and petroleum products: Require as a requirement for deductibility in operations related to hydrocarbons and petroleum products, to declare the information of the permit issued by the Energy Regulatory Commission or the Ministry of Energy to the supplier of the fuel. The deductibility requirement is subject to the declared permit being in force and not suspended.
  • Technical Assistance, Technology Transfer or Royalties: Eliminate the deductibility of payments for technical assistance, technology transfer or royalties, when the payments are made to residents in Mexico and the contract has agreed that the service would be provided by a third party, except in the case of the provision of specialised services or the execution of specialised works.
  • Bad debts: Establish as a requirement for the deductibility of bad debts, that it is notoriously impossible to collect the debts until such time as the taxpayer has exhausted the legal means to obtain collection and that, even if entitled to collection, it was not possible to recover them.
  • Thin capitalisation: In the deduction of interest, it must be demonstrated that the balance of stockholders' equity is consistent with the balances of the CUCA, CUFIN, CUFINRE accounts and the losses pending reduction, thus avoiding the possibility of deducting more interest than taxpayers would legally be entitled to because they do not fall under the hypothesis of thin capitalisation. Likewise, tax losses pending reduction that have not been considered in the determination of the tax result are included in the items for calculating the accounting capital for the year, thus considering all tax attributes in the calculation .

Clarify that individuals who only provide services under a contract entered into with persons holding permits, authorisations, contracts, concessions, among others, that allow the performance of activities related to strategic areas for the country or for the generation of electricity, have never been able to deduct interest accrued on debts contracted with their related parties resident abroad, so taxpayers indebted for performing such activities with strategic areas for the country, must prove that they are assignees or contractors or that they can perform such activities on their own account.

Non-regulated multiple purpose financial companies (SOFOMES ENR) that, in order to achieve their corporate purpose, carry out activities mainly with their domestic or foreign related parties, may not apply the exception of not including among their interest-bearing debts for the calculation of the amount in excess of three times their stockholders' equity, those contracted by members of the financial system in the performance of the operations that are part of their corporate purpose.

  • Investments:
  • Original Amount of Investment: Clarify that the original amount of the investment includes the expenses for the physical location, installation, assembly, handling, delivery, as well as those related to the contracted services.
  • Notice of Non-Useful Assets: Re-establish the obligation of legal entities to file the notice with respect to assets that are no longer useful for generating income.
  • Financial System:
  • The institutions of the financial system must submit monthly, instead of annually, the informative declaration of cash deposits made in accounts opened in the name of taxpayers.
  • Consider as a stock exchange not only the Mexican Stock Exchange, but any public limited company that obtains the corresponding concession title granted by the Ministry of Finance and Public Credit.
  • Spin-off and Tax Losses: Establish that taxpayers that carry out spin-offs must and may divide losses only when the spin-off and spun-off companies are engaged in the same line of business.
  • Change of Shareholders: Consider that there is also a change of partners or shareholders holding control of the company, in one or more acts carried out within a period of 3 years, counted from the time a merger takes place when in addition to the holders, directly or indirectly, of more than 50% of the shares or company parts with voting rights change, the direct or indirect holders of the rights to impose decisions at meetings, to direct the management, the strategy or the main policies of the company in any other way change, and when, after the merger, the company and its legal entity partner cease to consolidate their financial statements.
  • Notices of Share Transfers between Residents Abroad: Legal entities resident in Mexico that are the issuers of the shares transferred by residents abroad without a permanent establishment in the country will be jointly and severally liable for the taxes corresponding to the transfer, and must therefore submit the notice of such transfer the month following the date on which the transaction occurs, indicating the name or company name of the foreign residents, country of residence, as well as the amount and date of payment of the tax.
  • Net Tax Profit: To clarify that the PTU of companies is not a concept that has to be subtracted for the determination of the net tax profit.
  • Individuals with Rental Income: Taxpayers who grant the temporary use or enjoyment of goods must keep electronic accounting.
  • Personal Retirement Plans and Supplementary Retirement Contributions: Include as institutions to manage personal retirement plans the comprehensive investment fund share companies, provided that they obtain prior authorisation from the Tax Administration Service and meet the requirements and conditions to maintain their validity.
  • Related Party Transactions:
  • Eliminate references to related parties resident abroad, since the definition of related parties in the Law is applicable to related parties resident in the country and abroad, therefore, the obligations for legal entities with related party transactions are applicable to transactions with domestic and foreign parties.
  • Homologate the compliance date for the filing of the informative declaration and the local informative declaration of related parties, with the filing of the tax report, to 15 May of each year.
  • Apply the arm's length or arm's length principle to foreign residents subject to ISR, stating that they are obliged to determine income, gains, profits and, if applicable, deductions derived from transactions with related parties, considering the prices, amounts of consideration, or profit margins that they would have used or obtained with or between independent parties in comparable transactions.
  • Residents Abroad:
  • Acquisition of Property: When there is a difference of more than 10% with respect to the consideration agreed in the purchase and sale of real estate, the transferor (resident in Mexico or permanent establishment in the country) will be obliged to pay the tax and will replace the foreign resident in this obligation.
  • Sale of Shares: In transactions involving the sale of shares between related parties, where it is opted to pay tax on the gain or profit from the sale, in addition to the submission of an opinion, the transfer pricing study demonstrating the market value of the disposal of shares or securities representing ownership of assets must be included.

It is also specified that, in cases of group restructuring, it will be understood that the shares are outside the group when the issuing company and the company acquiring the shares cease to consolidate their financial statements in accordance with the provisions that regulate the taxpayer in accounting and financial matters, or that it is obliged to apply, in order for taxpayers to make the deferred tax payment.

It is also specified that this benefit will be applicable when the requirements are met and the respective authorisation is in place, including the restructuring or, as the case may be, the relevant transactions related to such restructuring have a business reason and the share exchange has not generated income subject to a preferential tax regime.

A transitional provision establishes that taxpayers who, as of 31 December 2021, have obtained an authorisation in force to defer payment of income tax, must inform the tax authority of the relevant transactions they carry out as of 1 January 2021.

  • Reduced Rates on Interest Withholding: The Law states that the reduced rates of 10% and 4.9% will not be applicable in the respective cases, when the beneficial owners receive more than 5% of the interest derived from the securities in question. However, given that in some cases these reduced rates are applied without considering the applicable limitations, because the interest is not derived from debt securities, the reference to "interest derived from debt securities" is eliminated, so that the limitation to apply the reduced rates applies to any transaction that gives rise to the payment of interest, as there is no reason to make a distinction in terms of transactions that do or do not derive from debt securities.
  • Compensation for Damages: It is included that when judgments or arbitration awards condemn a payment without indicating whether it is compensation for damages, the payer must make the withholding on the total income, leaving the burden of proof on the foreign resident receiving such income so that, at the time of requesting a refund of the tax withheld in excess, he can prove to the tax authorities the nature of the payment he has received and thus determine the appropriate tax treatment.
  • Legal Representation: Legal representatives of residents abroad must voluntarily assume joint and several liability for the payment of the tax incurred by the resident abroad, as well as include the requirement that the appointed representative be solvent. That is, he/she must have sufficient assets to ensure compliance with the substantive tax obligation.
  • Preferential Tax Regimes (REFIPRE)
  • It is established to change the name of Title VI of the respective Law, including related party transactions: "OF CONTROLLED FOREIGN ENTITIES SUBJECT TO PREFERENTIAL TAX REGIMES AND, OF MULTINATIONAL COMPANIES AND RELATED PARTY TRANSACTIONS".
  • It is established that rules related to inflationary adjustment and exchange rate effects referring to the Mexican peso have never been directed to income obtained abroad under a preferential tax regime, which is why such rules should not be taken into account when determining Mexican income tax for purposes of comparison with the tax actually paid in Mexico or for determining the tax result of the foreign entity subject to the REFIPRES provisions.
  • Multinational Enterprises and Related Party Transactions:
  • Only information from comparable transactions for the financial year under review should be considered. However, where the business cycles or commercial acceptance of a taxpayer's product cover more than one financial year, comparable transactions from 2 more financial years, earlier or later, may be considered.
  • The ranges of prices, amounts of consideration or profit margins, when there are two or more comparable transactions, shall be adjusted by applying the inter-quartile method established in the Regulations of the Law, the method agreed in the framework of a friendly procedure indicated in the treaties to avoid double taxation, to which Mexico is a party, or the method authorised in accordance with the general rules issued for this purpose by the Tax Administration Service.
  • Maquiladoras:
  • Eliminate the obligation to submit a written statement in which maquiladora companies declare to the tax authority that the tax profit for the year represented at least the greater of 6.9% of the total assets used or 6.5% of the total amount of operating costs and expenses ( Safe Harbor method), leaving in force only the obligation to submit the informative declaration of manufacturing, maquiladora and export services companies (DIEMSE), which must show the calculation according to the Safe Harbor method of the tax profit and the data taken into account for this purpose.
  • Eliminate the possibility for maquiladoras to obtain a private ruling from the tax authority confirming compliance with their transfer pricing obligations.
  • Tax Incentives: In the tax incentives granted to film production projects, theatrical, visual arts, dance, artistic, research and technological development, high performance sports, and investments for electric vehicles, in which taxpayers apply a tax credit equivalent to the total or partial amount of the contribution, expenditure or investment they have made in the project, as applicable in each case, against the income tax incurred in the fiscal year and/or provisional payments, it is established that the difference of the applicable tax credit may be credited against the resulting tax incurred, after deducting the corresponding provisional payments, as well as the creditable tax.
Value Added Tax Law (LIVA)
  • Animal Feedstuffs: Apply the 0% rate to products intended for human and animal feedstuffs, retaining the exceptions currently established in the LIVA.
  • Menstrual Hygiene Products: Establish that the above-mentioned hygiene products are subject to VAT at the rate of 0%.
  • VAT crediting: Expressly establish as a requirement for import VAT crediting that the customs declaration must be in the name of the taxpayer who intends to credit the tax paid on the import.
  • Non-crediting of VAT: Establish that the concept of activities not subject to the tax, includes the assumptions of those acts that are not considered to be carried out in national territory, as well as those carried out in national territory that do not fall within the assumptions of taxed activities, for which income is obtained or consideration is charged and that, for their performance, expenses and investments in which VAT is transferred to the taxpayer are indistinctly allocated, in order to be clear that the creditable VAT should only be related to expenses and investments that are allocated to the performance of taxed activities.
  • Pre-operational period: Establish that, in order to correctly determine the VAT credit adjustment in the pre-operational period, the taxpayer must inform the tax authority of the month in which it starts its activities for VAT purposes, in accordance with the general rules issued for this purpose by the Tax Administration Service.
  • Digital Services: Establish that the provision of information on the number of services or operations carried out with recipients located in national territory will be monthly and not quarterly.
  • Temporary Use or Enjoyment of Tangible Goods: Clarify that the temporary use or enjoyment of goods in national territory is subject to the payment of VAT, regardless of the place where the material delivery of the goods that will be the object of the temporary use or enjoyment takes place.
Federal Fiscal Code (CFF)
  • Residents in Mexico: Unless proven otherwise, individuals of Mexican nationality are presumed to be residents of Mexico, so that the status of resident in Mexico will not be lost if the individual does not prove such change or does not submit a notice of change of residence. Likewise, the term for maintaining the status of resident in Mexico of individuals or companies that change their tax residence to a country or territory with a preferential tax regime is extended from 3 to 5 years.
  • Suspension of Deadlines due to Force Majeure or Fortuitous Event: The proposal is to specify the power of the tax authorities to suspend, by means of general rules, the deadlines set out in the tax provisions, including those relating to compliance with obligations and the exercise of powers, when there is force majeure or fortuitous event.
  • Mergers and Demergers:
  • It is specified that the transfer to be made in a division is that of the share capital, in order to prevent divisions being made to transfer losses without transferring a minimum amount of share capital.
  • Mergers and demergers without a business purpose shall be considered as a disposal, considering for such purposes the relevant transactions carried out within the 5 years immediately preceding and following their completion.
  • Relevant transactions to be considered are any act, regardless of the legal form used, whereby:
  • Transfer of ownership, enjoyment or use of shares or of voting or veto rights in respect of decisions of the merging company, the acquiring company, the company being spun-off or the company being spun-off, or of the casting vote necessary to make such decisions.
  • Granting of the right to the assets or profits of the merging company, the transferor, the transferee(s) in the event of any kind of capital reduction or liquidation.
  • Decrease or increase of more than 30% in the book value of the shares of the merging, demerging, demerging or demerged company or companies, in relation to the determined value of these at the date of the merger or demerger of companies, which was recorded in the respective report.
  • Decrease or increase in the share capital of the merging, divisor, divided or divided company or companies, based on that stated in the report.
  • A partner or shareholder who received shares by virtue of the merger or division increases or decreases his or her percentage interest in the share capital of the merging, divisor, divided or spun-off company, and as a result increases or decreases the percentage interest of another partner or shareholder of the merging, divisor, divided or spun-off company, taking as a basis the percentages of interest in the share capital of such partners or shareholders as stated in the opinion.
  • Change of the tax residence of the partners or shareholders who received shares of the merging, divisional, spun-off or spun-up company, or of the merging, divisional, spun-off or spun-up company, as stated in the opinion.
  • Transfer of one or more segments of the business of the merging, divisor, divided or spun-off company(ies), as identified in the opinion.
  • Image Right with the Tax Treatment of Royalties: Consider the concept of the use or concession of use of a copyright on a literary, artistic or scientific work to include the right to the image, applying the tax treatment of royalties to the taxable income resulting from the exploitation of the copyright inherent to the image itself.
  • Advanced Electronic Signature or Digital Seal Certificate (CSD) for Legal Entities with Partners or Shareholders in Irregular Tax Situation: Deny the advanced electronic signature or, if applicable, the CSD when a partner or shareholder who has effective control of the legal entity requesting the procedure, has restricted digital seals or is listed for carrying out non-existent operations, without having corrected his or her tax situation. Or when the legal entity of which it is a partner is found to have such irregularities.
  • Cancellation of CSD: It is established that when the authority's procedures followed for the cancellation of CSD are exhausted or concluded, it will only notify the resolution relating to such cancellation. Likewise, when the tax authority has issued a resolution in which it resolves the merits of the matter, taxpayers may only carry out the procedure to obtain a new certificate, provided that they previously correct their tax situation. On the other hand, it is established not to limit tax secrecy for some cases of CSD cancellation.
  • Restriction of CSDs:
  • Simplified Trust Regime: When individuals in the simplified trust regime fail to make 3 or more monthly payments, whether consecutive or not, of the tax or of the annual tax return.
  • Resistance to the Verification of their Tax Obligations: When taxpayers repeatedly fail to cooperate during the exercise of the verification powers and have been fined for such reluctance.
  • Materiality of the Transactions Covered by Tax Receipts: When the taxpayer does not go before the tax authority to prove that he/she entered into the transactions with those who are definitively in a process of non-existent transactions, even when there is no liquidation or proceeding.
  • Inconsistencies: When the income declared, as well as the tax withheld by the taxpayer, stated in the provisional, withholding, final or annual tax returns, do not match the value of the taxable acts or activities declared in the provisional or final tax returns for the year, or the informative returns, in relation to the information held by the Tax Administration Service.
  • Irregular Partners: When a partner or shareholder who has effective control of the legal entity has restricted his or her digital stamps or is listed for carrying out non-existent operations, without having corrected his or her tax situation.
  • When the taxpayer does notrespond to the authority's request and the request for clarification is deemed not to have been filed, the 40-day period will continue to run as if the clarification had not been filed, and the use of the CSD will be restricted.
  • Electronic means: A digital document with advanced electronic signature or digital seal shall be verified not only with the remission of the original document with the author's public key through the mechanisms to be determined by general rules, in order to allow the use of innovative tools that enable the validation of documents.
  • Returns:
  • Time limits: Periods of time between the issuance of a request and its full reply shall not be taken into account in calculating the time limit for the return.
  • No Amount Limit: The income limit for filing tax refund requests in electronic format is eliminated, so all refund requests must be filed in electronic format.
  • Self-correction through the Offset of Tax Credits: An option is established so that, as of January 2023, taxpayers who are subject to the exercise of verification powers can correct their tax situation by applying the amounts they are entitled to receive from the tax authorities for any concept against the omitted taxes and their accessories, as determined by the tax authority; this, even when different taxes are involved. In other words, the universal offsetting of credit balances will only apply when it is applied to correct the tax situation. For such purposes, it is established that the taxpayer must submit a request to the tax authority, which will decide and notify the taxpayer of the amount of the credit balance accepted for the correction, which in turn may be totally or partially accepted or rejected by the taxpayer. It is important to mention that no right to a refund or compensation will be generated in the event that the taxpayer does not accept the application of the credit balance, or in the event that such amount is greater than the credit determined by the authority.

The amounts of the taxpayer's credit balance, which derive from a resolution of an administrative appeal or a ruling issued by a judicial body, shall not be subject to application. Likewise, the acts issued by the tax authority in this process may not be challenged.

  • Joint and several liability: It establishes the cases in which there is acquisition of negotiations, and joint and several liability applies.
  • RFC:
  • It is established that individuals from the age of 18 who reach the age of majority must register with the RFC, however, the registration will be carried out as "registration of individuals without economic activity", so that the registration will not generate tax obligations or give rise to the payment of taxes or penalties.
  • The authority is empowered to cancel or suspend the RFC registration when it detects that in the last 5 years the taxpayer has not carried out any activity, has not issued tax receipts, has no outstanding obligations to fulfil, or there is proof of death.
  • For the cancellation of the RFC, a positive opinion on compliance with tax obligations in the area of social security is required.
  • CFDIs:
  • Free Export: The exporter is obliged to issue the CFDI for exports of goods that are not sold or whose sale is free of charge.
  • Publication of Complements: It is specified that the publication of CFDI complements in electronic media is on the website of the Tax Administration Service.
  • CFDI Certification Providers: The authorisation and operation of CFDI certification providers is regulated.
  • CFDI's of Expenses: CFDI's that do not have the necessary supporting documentation cannot be deducted from the taxpayer's income with CFDI's of expenses, but must be cancelled.
  • Inconsistencies of Description and Economic Activity: When the information corresponding to the service, goods, merchandise or use or enjoyment indicated in the CFDI does not coincide with the economic activity registered in the RFC, the authority will proceed to update the taxpayer's economic activity in the register.
  • Cancellation of CFDIs: In order for taxpayers to be able to cancel CFDIs, they must prove and justify that said receipts were in fact defective in their issuance, being able to prove to the tax authority that said cancellation is justified.
  • Exchange of Information: The information and documentation of residents abroad and of the Standard for the Automatic Exchange of Financial Account Information in Tax Matters shall be retained for a period of 6 years from the date on which the respective information or documentation was generated or should have been generated, or from the date on which the related returns were filed or should have been filed, as the case may be.
  • Relevant Transactions: Included in the information that taxpayers must submit on relevant transactions is that relating to relevant merger and spin-off transactions, restructuring of companies, and disposal of shares.
  • Fiscal Opinion: It is mandatory for legal entities of the general regime that in the last fiscal year declared have recorded in their normal tax returns accruable income for income tax purposes equal to or greater than an amount equivalent to $1,650,490,600.00 MXN, as well as those that at the close of the immediately preceding fiscal year have shares placed among the general public investor, in the stock exchange. Taxpayers who choose to have their financial statements audited will declare it when filing the income tax return for the fiscal year corresponding to the fiscal year for which the option is exercised. On the other hand, it is established that the filing of the report must be made by 15 May of each year.

Taxpayers that are related parties of those who are obliged to report their financial statements, submit information on their tax situation.

Likewise, it is established that registered public accountants who, when preparing the opinion on the financial statements, were aware that the taxpayer had engaged in conduct that could constitute an offence, without having informed the tax authority, and subsequently criminal proceedings were brought in respect of such conduct, will be liable for concealment of tax offences.

  • Controlling Beneficial Owner: A controlling beneficial owner is defined as a natural person or groups of natural persons who effectively control or benefit economically from a legal person or legal entity by holding a significant percentage of the entity's shares, or such percentage represents a significant share of the voting rights or the ability to appoint or remove members of the entity's management.

It establishes the obligation for legal entities, trustees, settlors or trustees, in the case of trusts, as well as the contracting parties or members, in the case of any other legal entity, to obtain and keep, as part of their accounting and to provide the Tax Administration Service, the information relating to their controlling beneficiaries in a reliable, complete and updated manner. Likewise, a positive opinion of compliance must be obtained if all the obligations related to the figure of the controlling beneficiary are observed.

It establishes the power for desk reviews, aimed at the subject matter of controlling beneficiary and automatic exchange of financial information.

  • Declarations and Voluntary Compliance: In order to benefit from the best international practices in the field of voluntary and cooperative compliance, the Tax Administration Service will implement the international compliance certainty programme, as well as to establish tax certainty and dispute prevention programmes. In this regard, the international compliance certainty programme is a multilateral project in which different tax administrations initially participated in January 2018, with the aim of conducting a risk analysis on the financial and tax information of multinational groups.
  • Appraisals: The tax authorities may carry out appraisals of intangible assets or in respect of income received for services, as well as when a presumptive profit is determined in the case of intangible assets involved in the sale or acquisition of goods whose price was agreed at below-market values between independent parties. This power to carry out appraisals is different from the appraisals that the authority orders to be carried out.
  • Simulation of Legal Acts for Tax Purposes: The aim is to incorporate the power for the tax authorities, in the exercise of their verification powers, to determine the simulation of legal acts, exclusively for tax purposes, duly founded and motivated within the verification procedure and declared to exist in the very act of determining the tax situation of the taxpayer, provided that these are transactions between related parties. In legal acts in which there is simulation, the taxable event taxed shall be the one actually carried out by the parties.
  • Confidentiality in Desk Reviews: It is envisaged to include for desk reviews the procedure to disclose to the taxpayer and its representatives confidential information provided or obtained from independent third parties regarding comparable transactions that affect the competitive position of such third parties, which is currently only established for when a home visit is carried out. Access to this information will only be for the purpose of the taxpayer correcting its tax situation, disproving facts or omissions or challenging the resolution that determines the tax credit. The above, provided that the taxpayer and his representatives sign the confidentiality document.
  • Conclusive Agreements: Conclusive agreement procedures should last no longer than 12 months from the date of the request.
  • Reductions of Fines: The reductions shall apply provided that no dispute resolution procedure established in a double taxation avoidance treaty to which Mexico is a party has been filed.
  • Penalty Applicable to the Optional Regime for Groups of Companies: Included to penalise with a fine of 60% to 80% of the difference between the declared loss and the loss actually incurred.
  • Infringements and Fines: The infringements and penalties applicable to non-compliance with the obligations proposed in the project are established.
Law on the Special Tax on Production and Services (LIEPS)
  • Import of Automotive Fuel: Establish that when the customs or tax authority, in the exercise of its powers of verification, detects that due to the characteristics of the merchandise being introduced into national territory, this corresponds to automotive fuels in respect of which the total or partial payment of the tax has been omitted, the corresponding quota will be applied according to the type of fuel in question, without prejudice to the administrative and criminal sanctions that may be applicable.
  • Definitions Related to Alcoholic Beverages (Electronic Tag and Establishment): Establish what should be understood by electronic tag, in order to provide legal certainty on its application and establish its material and operational difference with respect to the physical tag, which is maintained. In this regard, the physical tag is provided printed and can be attached to any part of the container except for the base, while the electronic tag is provided by the authority in the authorised electronic folio, which will be printed on the label or back label of the container containing alcoholic beverages.
  • Establishment of Final Consumption: Establish a non-limiting list of places where alcoholic beverages are regularly sold for final consumption, indicating as such canteens, bars, breweries, nightclubs, cabarets, restaurants, hotels, social centres, discotheques, lunchrooms, restaurants, kermises, fairs, shows, public dances, halls, banquets, casinos, and all those where alcoholic beverages are opened for sale and final consumption.
  • Alcoholic Beverages for Consumption in the Same Place or Establishment where they are Sold: The authority may issue rules of a general nature to establish the cases in which taxpayers who alienate alcoholic beverages to the general public for consumption in the same place or establishment in which they are alienated, may not destroy the containers that contained them, immediately after their contents have been exhausted and use them for display. It is also established that establishments must scan the QR codes on the alcoholic beverage labels in the presence of the consumer.
  • Denatured Alcohol and Uncrystallisable Honeys: Eliminate the obligation for manufacturers, producers, bottlers and importers of denatured alcohol and uncrystallisable honeys to register in the Alcoholic Beverages Taxpayers' Register, leaving only alcohol manufacturers, producers, bottlers and importers obliged to do so.
  • Security Code Printing Service Providers: Eliminate the figure of the security code printing service provider for cigars and other manufactured tobaccos (with the exception of cigars and other manufactured tobaccos made entirely by hand) and establish that the Tax Administration Service will be in charge of generating and providing the referred codes.
  • Security Code on Cases, Packages, Wrappers or Any Other Form of Presentation: Include as an obligation for producers, manufacturers and importers of cigars and other manufactured tobaccos to print the security code on any means of presentation of their products and not limit the security codes to be requested only for printing on packets.
  • Automotive Fuel Fees: Modify the procedure for updating the fees applicable to automotive fuels to reflect anticipated inflation during 2022, in line with the General Economic Policy Criteria 2022.
New Car Tax
  • Armoured cars: Eliminate the special treatment for new armoured cars, determining the tax base, including the value of the material used for the armouring. Likewise, it is established that the applicable amounts in force for the fiscal year 2022, where they will be updated in January 2022, with the update factor corresponding to the period from December 2020 to December 2021 and the SHCP will publish in the DOF the update factor in the first 3 days of January 2022.
Proposal: Economic Package 2021 2560 1440 brouoadmin

Proposal: Economic Package 2021

Photo by Ricardo Ortiz from www.pexels.com

For the Fiscal Reform for the fiscal year 2021, the Executive presented on 8 September 2020, to the Congress of the Union, the respective Economic Package, which includes, among others, proposals for the Fiscal Miscellaneous on the Income Tax Law (LISR), the Value Added Tax Law (LIVA), the Special Tax on Production and Services Law (IEPS) and the Federal Fiscal Code (CFF).

The proposal of the Economic Package does not include new taxes, but it does include adjustments to the applicable regulations regarding compliance with obligations and requirements by increasing taxation, based on the premises of administrative simplification, legal certainty, modernisation, tax management, collection efficiency, combating corruption and impunity, and tax evasion and avoidance.

Once the bill is considered by the Chambers of Congress, it must be approved by 31 October 2020 at the latest, to enter into force in 2021.

However, although the final approval of the project is still pending, the following are the most relevant aspects included in the reform of the LISR, LIVA, LIEPS and CFF:

1. Income Tax Law (LISR)

1.1. Elimination of the Escuela Empresa Programmes as authorised grantees.

Given that there are no applications from School Enterprise Programmes to receive income tax deductible donations, it is proposed to eliminate such programmes as authorised donees.

1.2. Non-profit legal entities that need to be authorised as donatarias in order not to pay ISR

On the other hand, associations or societies that grant scholarships, those dedicated to scientific or technological research, those dedicated to the research or preservation of wild, terrestrial or aquatic flora or fauna and environmental protection activities, and entities dedicated to the reproduction of species in protection and danger of extinction and to the conservation of their habitat, may be taxed as non-profit legal entities, provided they obtain authorisation to receive deductible donations, otherwise they must pay the corresponding ISR for their activities.

1.3. Expenditure to be considered as distributable retained earnings of non-profit legal persons

It is proposed that non-profit legal entities, in addition to being authorised as donors, should support their acts and activities with tax receipts and the corresponding additional documentation, otherwise any unsupported expenses will be considered as distributable surplus.

1.4. Cooperative bodies for integration and representation referred to in the General Law on Cooperative Societies.

It is proposed to add as non-profit legal persons for ISR purposes as cooperative organisations for the integration and representation of cooperative societies.

1.5. Special requirements for authorised donees

1.5.1. Income not related to the authorised activity

It is proposed to revoke the authorisation of authorised donatarias to those that obtain more than 50% of their income from/to activities unrelated to their activity, in order to prevent them from engaging in lucrative activities. In case they do not obtain their authorisation again within 12 months after the loss of the first authorisation, they will have to allocate all their assets to another donataria authorised to receive income tax deductible donations.

1.5.2. Simulation

Authorised taxpayers who have obtained tax receipts issued by taxpayers with non-existent and/or simulated operations, and who are listed as such by the tax authorities, must consider as income the amount covered by the said tax receipts, and must pay the tax if within 30 days they do not prove that they effectively acquired the goods or received the respective services.

1.5.3. Donor assets

Donatarias may only allocate their assets to other authorised donatarias when their authorisation is revoked and/or lapses. Donataria beneficiaries must issue the corresponding tax receipt for the donation, which will not be deductible for income tax purposes. The above will also be applicable in the event that an authorised donee's request for cancellation of its authorisation is approved.

1.5.4. Revocation of Donor Authorisation

In scope and congruence with the above, the draft additionally proposes to revoke the authorisation of the donatarias when they do not use their assets for the exclusive purposes of the corporate purpose for which they obtained their authorisation, do not issue tax receipts or issue them as donations when they correspond to a different operation that is not a donation, as well as when they are on the definitive list of taxpayers that carry out non-existent and/or simulated operations.

Likewise, the authorisation will be revoked if the legal representative(s), partners or associates or any member of the Board of Directors or Administration of a civil organisation or trust whose authorisation has been revoked within the last 5 years, form part of the civil organisations and trusts authorised to receive deductible donations during the validity of the authorisation.

Civil organisations and trusts whose authorisation to receive deductible donations has been revoked for the above reasons may not obtain again the authorisation to receive deductible donations until they correct the reason for which they were revoked or pay the corresponding ISR.

On the other hand, in the event that the authorisation is revoked for obtaining income not related to the purpose of the donee, it will not be possible to obtain authorisation again and all its assets will have to be allocated to another authorised donee.

The SHCP must notify the taxpayer of the grounds for revocation of its authorisation as a donee, giving the taxpayer the opportunity to refute the observations and/or grounds for such revocation.

1.5.5. Elimination of certification of donatarias

It is proposed to eliminate the option for donors to be certified for compliance with tax, transparency and social impact assessment obligations.

1.6. Maquiladoras

It is proposed to clarify the transfer pricing requirements that maquiladoras must comply with, indicating the elimination of the requirement for maquiladoras to obtain and keep transfer pricing documentation, i.e. transfer pricing studies, as this requirement does not correspond to the current regulation and currently it is only necessary for the taxpayer to have a particular resolution or Advance Transfer Pricing Agreement.

  1. Value Added Tax Law (LIVA)

2.1. Medical professional services exemption

Since authorised welfare or charitable institutions are created on a non-profit basis, it is proposed to include in the tax exemption for professional medical services those provided through such institutions, provided that the provision of services requires a medical degree and are provided by natural persons, either individually or through civil partnerships.

2.2 Digital Services

2.2.1. Brokering for the sale of used movable property

The exemption for digital intermediation services aimed at the disposal of used movable goods is eliminated.

2.2.2. Residents abroad providing digital services through digital intermediation platforms

It is proposed to establish the obligation for digital intermediation platforms to withhold 100% of the VAT charged when they provide their intermediation services to foreign residents without an establishment in Mexico, whether individuals or legal entities, who provide digital services to persons located in the country, to whom they process payments, as it has been observed that these foreign residents do not comply with the obligations of law to register in the RFC, indicate a domicile in the country and designate a legal representative, due to their low participation in the Mexican market.

It is also proposed that foreign residents without a permanent establishment in the country who provide their services to recipients in Mexico through digital intermediation platforms are not obliged to comply with the obligations to register with the RFC, offer and collect the tax in the price, provide information to the tax authorities, provided that the intermediation platforms withhold and pay the respective tax.

Likewise, the digital intermediation platforms that process the payments that withhold the tax will not be obliged to provide the tax authorities with information on foreign residents without an establishment in Mexico who provide digital services, in whose transactions they have acted as intermediaries; however, intermediaries must issue and send to the recipients of the digital services in national territory who request it, the receipts corresponding to such services, with the tax transferred expressly and separately, either in the name of the person to whom the withholding is made or in their own name.

It is also proposed that digital intermediation platforms, instead of expressly and separately indicating the tax corresponding to the price at which the respective goods or services are offered, may publish it without doing so, provided that such prices include the tax and are published with the legend "VAT included".

2.3. Failure to fulfil obligations

Given the lack of jurisdictional control over residents abroad who provide digital services and who for this purpose require the use of Internet access infrastructure provided by public telecommunications network concessionaires in Mexico in order to enable the connection between the sender and receiver of the digital service, it is proposed to establish a control mechanism so that when taxpayers providing digital services resident abroad without an establishment in Mexico incur in serious tax omissions, the temporary blocking of Internet access to their services can be carried out.

However, it is proposed to establish a procedure that respects the right to a hearing prior to the issuance of the blocking order, whereby the tax authority must inform the taxpayer of the resolution determining non-compliance with the obligations in question, so that the taxpayer may disprove or correct the non-compliant obligations.

It is also proposed that the tax authority should officially publish the names of taxpayers who are blocked.

  1. Federal Fiscal Code (CFF)

3.1. General anti-abuse rule

It is proposed to clarify that the application of the general anti-abuse rule to determine the legal effects that the tax authorities grant to taxpayers' transactions that are considered to have no business reason, will be limited to tax matters without prejudice to investigations and the corresponding criminal liability, in relation to the offences established in the CFF.

3.2. Tax box opening hours

In order to provide legal certainty on the tax mailbox opening hours, it is proposed to specify that the Central Zone of Mexico is the one that governs the operation of the tax mailbox.

3.3. Disposals with deferred payment or in instalments

It is proposed to specify that the sale will also be considered as a deferred payment or partial payment sale when a simplified tax receipt is issued and even when the sale is made to the general public.

3.4. Demergers of companies

It is proposed to provide that the demerger of companies will have the character of a disposal, even when the requirements of non-alienation are met, when as a result of the demerger concepts or items are generated that did not exist prior to the demerger, and which, although they respond to the need to balance the accounting equation, as a consequence of the way in which the shareholders' meetings of the spin-off and spun-off companies decided to distribute the values existing in the asset and liability accounts, no tax consequences of income and performance of acts or activities can be attributed to them.

In this respect, it should be added that if a spin-off of companies generates concepts or items that did not exist before, the shareholders of the spun-off companies will be jointly and severally liable, without limitation, in the spin-off company or companies spun off.

3.5. Updating the regulatory framework for recognised markets

In order to be congruent with the Securities Market Law, it is proposed to adjust the recognition within the stock exchange market to any public limited company that obtains the concession title granted by the SHCP, and not only to the Mexican Stock Exchange.

3.6. Identity verification service

Individuals who determine the use of the advanced electronic signature as a means of authentication or signing of digital documents may request SAT to provide the verification and authentication service of the advanced electronic signature certificates, as well as the verification of the identity of the users, which is derived from the biometric information on the identity of the persons or taxpayers that the tax authority collects when processing the electronic signature; said verification service shall be provided without exposing any personal data provided by the citizen.

3.7. Cancellation of digital seal certificates

It is proposed that digital stamp certificates be cancelled and not only restricted when taxpayers are definitively listed as taxpayers who carry out non-existent transactions and/or unduly transfer tax losses.

On the other hand, it is proposed that in the procedure to disprove irregularities related to digital seal certificates, the deadline for the authority to issue a resolution be extended from 3 to 10 days.

However, taxpayers whose digital seal certificate has been rendered ineffective may carry out the procedure determined by the SAT by means of general rules in order to rectify the irregularities detected, in which they may provide the evidence they deem appropriate and, if applicable, obtain a new certificate.

On the other hand, it is proposed that in the procedure to disprove irregularities related to digital seal certificates, the deadline for the authority to issue a resolution be extended from 3 to 10 days.

3.8. Restriction of digital seal certificates

The draft reform proposes to establish a time limit of 40 working days so that taxpayers whose use of the digital seal certificate for issuing CFDIs has been temporarily restricted may submit a request for clarification to rectify the irregularities detected, or else to disprove the causes that led to the application of such measure; once the taxpayer has submitted the corresponding request for clarification, the day after this happens, the tax authorities must re-establish the use of the digital seal certificate for the issuance of digital tax receipts via the Internet, a situation that will be allowed until the resolution on such procedure is issued.

The tax authority shall issue a decision on the procedure within a maximum of 10 days.

If the request for clarification is not submitted and/or the irregularities pointed out by the authority are not refuted, the digital seal certificates will be rendered null and void.

3.9. Messages of interest

It is proposed to establish that the tax authority, in addition to notifying any administrative act or resolution it issues, in digital documents, including any that may be appealed, the tax authority may also send messages of interest informing taxpayers, through the tax mailbox, of benefits, facilities, invitations to programmes, aspects related to their tax situation and useful information for complying with their tax obligations. It is also established that individuals and companies that have been assigned a tax mailbox should consult it within 3 days of receiving a notice from the tax authority, by any of the means of contact registered by the taxpayer, which may be by e-mail or mobile phone number.

3.10. Refund of credit balances

The draft reform proposes that the failure to locate the taxpayer, or the address stated in the RFC, should be considered as grounds for considering a refund request as not having been filed.

In this regard, it should be noted that this ground does not imply a refusal for the taxpayer, since it must only regularise its situation before the RFC, by filing the corresponding notice, so that the authority can verify the veracity of the information provided to the RFC and, if applicable, determine the validity of the request for the credit balance.

Likewise, the reason for not considering an application for a refund as not having been submitted shall not be considered as a collection procedure that interrupts the statute of limitations of the obligation to repay.

In the case of several refund requests from the same taxpayer for the same type of tax, it is proposed that the authority should carry out a single exercise of powers for the total of the requests or one exercise of powers for each of them, issuing, however, a single decision.

It is also proposed to establish that once the authority's verification powers in a refund procedure have been concluded, the authority must issue and notify the taxpayer of the corresponding resolution within 20 days instead of 10.

3.11. Joint and several liability

A resident in Mexico or a resident abroad with a permanent establishment in the country who maintains operations with related parties resident abroad shall be considered jointly and severally liable when the latter constitute a permanent establishment in Mexico.

The aforementioned case of joint and several liability for company spin-offs is also added.

3.12. Federal Register of Taxpayers

It is proposed to amend the obligation to provide an e-mail account and a telephone number to specify that these details must be registered and kept up to date.

On the other hand, it is proposed to specify that the information that the authority requires from the partners and shareholders of a legal person is also that of related figures such as associates, patrons, among others, i.e. it should correspond to that information related to the persons who are members of the legal person and whose functions, obligations and rights are similar to those of a partner or shareholder, regardless of the name by which they are designated or recognised by the legislation or bylaws under which they are constituted.

Likewise, the draft reform proposes that the SAT may suspend or reduce obligations that taxpayers have registered with the RFC when it determines that they have not carried out any type of activity in the last three previous fiscal years.

It is also proposed that prior to the cancellation of the RFC, and in order to foresee the possibility that the tax authorities may obtain tax losses, taxpayers, in addition to complying with the obligations and requirements established through general rules, must be up to date in the fulfilment of their obligations in order for their cancellation to proceed, i.e. a taxpayer who has tax credits, for example, may not cancel his registration until the corresponding debt has been paid.

However, in those cases where the taxpayer is materially already liquidated, but fiscally their registration is not yet cancelled due to non-compliance with any obligation, such taxpayer will not have to comply with periodic (formal) obligations, so that until such time as they can be fiscally cancelled, they will not have to comply with the filing of returns or any other formal obligation.

3.13. Digital Tax Receipts via Internet (CFDI)

It is proposed to clarify the concept of transactions with the general public as those in which the RFC of the recipient of the voucher is not available, and the possibility of granting facilities to them.

The data on the quantity, unit of measurement and class of the goods or merchandise or description of the service or use or enjoyment covered by the CFDIs, shall be recorded in the digital tax receipts via internet using the catalogues included in the applicable technological specifications for their issuance.

On the other hand, with respect to CFDIs corresponding to advance payments or partial or deferred payments, it is proposed to clarify and specify in the rule that a receipt must be issued for each payment, regardless of whether this is prior (advance payment) or subsequent to the time at which the transaction is carried out, as well as to indicate that the form of covering the payment of the transaction is a deferred payment.

It is also established that those who make partial or deferred payments that settle CFDI balances, export goods that are not sold or whose sale is free of charge, must also request the corresponding CFDI.

3.14. Preservation of accounts and supporting documents

It is proposed that the obligation to keep accounting and documentation related to compliance with tax provisions should not be for 5 years but indefinitely, or for the entire duration of the respective partnership or contract, when the information and documentation is necessary to implement agreements reached as a result of dispute resolution procedures provided for in treaties to avoid double taxation to which Mexico is a party.

The same shall apply in the case of the articles of incorporation of legal entities, joint venture contracts, articles of incorporation recording the increase or decrease of share capital, mergers or spin-offs of companies, and certificates issued or received by legal entities when distributing dividends or profits.

It is worth mentioning that the draft reform also proposes to specify the documentation to be kept in each of the following cases:

  • Capital increases: statements of account issued by financial institutions, or the corresponding appraisals for increases in kind, with which the materiality of the capital increase can be verified.
  • Increases due to capitalisation of reserves or dividends: minutes of the meeting recording these acts, as well as the corresponding accounting records.
  • Increases due to the capitalisation of liabilities: minutes of the meeting in which these acts are recorded, as well as the document certifying the accounting existence of the liability and the corresponding value thereof.
  • Minutes of the reduction of share capital by means of reimbursement to the members: Statements of account issued by financial institutions showing such situation.
  • Minutes of reduction of share capital by means of release granted to members: minutes of subscription, release and cancellation of shares, as appropriate.
  • Merger or spin-off of companies: statements of financial position, statements of changes in stockholders' equity and the working papers for the determination of the net tax profit account and the capital contribution account for the financial year immediately preceding and following the year in which the merger or spin-off took place.
  • Statements issued or received for distribution of dividends or profits: statements of account issued by financial institutions showing this situation.

On the other hand, it is established that in the event that the tax authority is exercising verification powers with respect to tax years in which tax losses from previous years are reduced, dividends or profits are distributed or paid, capital is reduced or capital remittances are reimbursed or sent in terms of the LISR or amounts are received by way of a loan, granted or received, regardless of the type of contract used, taxpayers must provide the documentation that proves the origin and origin of the tax loss, the supporting documentation of the loan or the documentation and information supporting the originating balance and movements of the net tax profit account, of the contribution capital account or of any other tax or accounting account involved in the aforementioned acts, regardless of the year in which the loss, the loan, or the movements of the net tax profit account, of the contribution capital account or of any other tax or accounting account involved originated.

This also applies in the case of contracting debts with creditors, or for the recovery of debts from debtors.

Taxpayers shall not be obliged to provide the documentation requested above when, prior to the exercise of the verification powers, the tax authority has exercised such powers in the year in which the tax losses for which verification is requested were generated, except in the case of non-reviewed facts.

3.15. Financial Account Reporting - Standard for the Automatic Exchange of Financial Account Information for Tax Purposes (FATCA AND CRS)

It is proposed to amend the date of submission of information on high-value accounts and new reportable accounts, as well as information on low-value accounts and pre-existing accounts of entities that are reportable accounts by annual declaration to the tax authorities to no later than 31 August and, for the first time, no later than 30 June 2017 (Annexes 25 and 25 Bis of the Miscellaneous Tax Resolution).

3.16. Taxpayer assistance

It is proposed to specify that tax authorities may provide assistance not only to taxpayers with respect to specific tax obligations, but to the general public, as well as information on the possible consequences of non-compliance with tax provisions, and to specify that in cases where the explanation concerns tax provisions of a complex nature, tax authorities should provide printed or digital support material, rather than the production and distribution of leaflets.

Likewise, it is proposed that the authorities provide periodically and in general for taxpayers, on a purely indicative basis and for the purpose of measuring tax risks, information on reference parameters with respect to the profit, deductible concepts or effective tax rates presented by other entities or legal entities that obtain income, considerations or profit margins for the performance of their activities based on the economic sector or industry to which they belong.

The draft reform also proposes to promote voluntary compliance in the filing of tax returns and to allow taxpayers to correct their tax situation by sending taxpayers payment proposals through pre-filled tax returns, as well as communications to promote voluntary compliance and to inform about the inconsistencies detected by the authority, without this being considered as the initiation of verification powers.

3.17. Precautionary securing of assets

It is proposed to include third parties and/or jointly and severally liable persons related to the taxpayer who is the direct taxpayer as subjects of the measure of constraint of seizure of goods and/or negotiations.

In this respect, it is proposed to establish that the amount of the precautionary seizure should be one third of the amount of the operations, acts or activities that the third party carried out with the taxpayer or the person jointly and severally liable, or of the amount that the tax authority intends to verify with the requests for information or requests for documentation addressed to them.

It is also proposed to establish the order of priority of the assets to be insured, with bank deposits in the first place, followed by accounts receivable, shares, bonds, matured coupons, etc.; money and precious metals; real estate; movable property; the taxpayer's business; as well as copyrights and artistic works, scientific collections and jewellery, among others.

It is also proposed to carry out the precautionary seizure of containers containing alcoholic beverages that do not have labels or seals attached, when these are false or altered, as well as of labels or seals in the taxpayer's possession for which there is no proof of legal possession.

It is also proposed that the assets or business of taxpayers, jointly and severally liable parties or third parties related to them be secured from the very moment they are designated as such in the proceeding by which the precautionary seizure is carried out, even when they are subsequently ordered, recorded or registered with other institutions, bodies, registries or third parties, in order to prevent fraudulent actions by taxpayers to avoid the precautionary seizure of their assets.

3.18. Powers of verification

3.18.1. Home visits

The draft reform proposes to specify that in cases of home visits related to foreign goods, rules and provisions of the Customs Law shall apply.

3.18.2. Signing of home visit reports

It is proposed that, as in the case of home visits to verify the issuance of tax receipts, it be established that the validity and probative value of home visit reports will be affected when the person who attended the visit or the witnesses refuse to sign the report or to accept a copy of it.

3.18.3. Use of technology

It is proposed to incorporate the use by the tax authority of tools such as photographic and video cameras, tape recorders, mobile phones or others, which allow the collection of information that serves as a record of the facts detected by the tax authority in the exercise of its actions, in addition to the fact that the result of the use of these tools will be protected by tax secrecy.

3.18.4. Home visit locations

It is established that the audit may be carried out in those places where the taxpayer carries out part of its activities, i.e., in addition to the tax domicile, establishments, branches, premises, offices, warehouses, stores, fixed and semi-fixed stalls on the public highway, of taxpayers or tax advisors, provided that they are open to the general public.

3.18.5. Tax assessment

It is proposed to specify that in the review of the audit opinion the public accountant may be required not only to produce the working papers he/she prepared for the audit but also to appear before the tax authority to answer questions in relation to those working papers.

It is established that the review of the report shall be carried out exclusively with the public accountant who has prepared it, without legal representation.

It is also proposed not to limit the authority's actions to the review of the report and, therefore, not to proceed with the sequential review of the report when it is a review of the benefits derived from the authorisation or concession granted to individuals for the handling, storage and custody of goods, i.e. when reviewing tax or bonded warehouses, or when it is only a matter of fines in foreign trade matters.

3.18.6. Deadline for submission of reports or documents

The deadline for replying to the first request for information issued by the authority is extended from 6 to 10 days.

3.18.7. Electronic reviews in the field of foreign trade

It is proposed to specify that the deadline for concluding the electronic audit will be 6 months, irrespective of the subject matter, and will only be 2 years when an international comparison is carried out as part of the procedure.

3.18.8. Fiscal secrecy

As a result of the inclusion of the use of technological tools in the exercise of the tax authorities' powers of verification, it is proposed to establish within the obligation to maintain absolute confidentiality, the images and any material collected by the tax authority through the use of the aforementioned technological tools.

Likewise, it is proposed to incorporate as an exception to fiscal secrecy the obligation provided for in the National Code of Criminal Procedures regarding the obligation to provide the information required by the Public Prosecutor's Office and the Police regarding investigations into specific criminal acts, as this contributes to clarifying the facts, ensuring that the guilty party does not go unpunished and that the damage is repaired.

3.18.9. The origin of new revisions.

In the event that there is already a final ruling by the tax authority that has determined the tax situation of the taxpayer with respect to specific items or concepts corresponding to one or more taxes or charges for a given period, such items or concepts may be reviewed again only when facts different from those already reviewed are proven and the tax authorities' powers of verification have not expired, and they may, where appropriate, determine the omitted taxes or charges derived from such new facts.

3.19. Presumption of improper transfer of entitlement to tax loss relief

Among other assumptions, the presumption for the undue reduction of tax losses will apply when the taxpayer obtains tax losses and deductions are found whose consideration is covered by the subscription of debt securities or any other legal figure, and the obligation acquired is extinguished through a form of payment other than those provided for the purposes of deductions in the LISR; in other words, the reform consists of not limiting the form of payment to debt securities.

On the other hand, it is proposed to establish that the tax authority may, in the exercise of its powers, consider the undue transfer of tax losses as a simulated act and consequently establish criminal or criminal liability.

Currently, the applicable rule establishes that taxpayers may rebut the presumption in question within a period of 20 days after they have been notified of said presumption. Therefore, the draft reform establishes that taxpayers may request, through the tax mailbox, a one-time extension of 10 days to the initial period to provide the information and documentation they deem appropriate.

It is also proposed that when the taxpayer makes statements to rebut the presumption in question, it should indicate the purpose of the legal acts that gave rise to the transfer of the right to the reduction of tax losses, so that the authority is in a position to determine that the main purpose of the transfer was to carry out its business activity and not to obtain a tax benefit.

3.20. Conclusive agreements

The Executive proposes in its tax reform bill an adjustment to the procedure for the adoption of conclusive agreements by limiting deadlines and including the cases in which the request for an agreement would be inappropriate.

In this regard, it is proposed that, although the adoption of the conclusive resolution may be requested at any time, it is indicated that the time limit for doing so shall be 15 days following the date on which the final act has been drawn up or the notification of the official notice of observations or the provisional resolution, as the case may be, has been made.

Likewise, it is proposed that the agreements corresponding to the exercise of verification powers in terms of refunds of credit balances or payment of undue payment are improper, since there is no determination of omitted taxes, or practices that are recognised as evasive.

Likewise, it is proposed that the agreements should be inadmissible when the resolution determining the tax credit is already in the process of being notified, when it is a question of compulsory assessments to third parties, the execution of sentences or resolutions, when the applicants for the adoption of a conclusive agreement are companies that invoice simulated operations (EFOS), presumed or definitive, and verification powers are initiated with regard to the issuing of tax receipts or when there is a presumption of the commission of tax crimes.

Finally, it is proposed that no dispute resolution procedure provided for in any international treaty to avoid double taxation signed by Mexico will proceed against the conclusive agreement reached between individuals and authorities.

3.21. Fines related to transfer pricing and adjustment

In relation to the imposition of fines, it is proposed to consider as an aggravating circumstance the non-compliance with transfer pricing obligations, such as failing to obtain supporting documentation of having agreed market prices with related parties resident abroad, as well as failing to file master, local and country-by-country information returns, among others.

3.22. Infringement for concessionaires of public telecommunications networks

In line with the sanctions established for non-compliance with some of the obligations of foreign residents without an establishment in Mexico that provide digital services in the country, it is proposed to establish a sanction for concessionaires of a public telecommunications network in Mexico that do not comply, within a maximum period of 5 days, with the order to block access to the digital service of the provider of such services. Likewise, an equal sanction will be applied when the aforementioned concessionaires do not carry out the unblocking within the corresponding period.

3.23. Presumption of smuggling

It is proposed that the practice of importers of not returning abroad, transferring or changing the regime of temporarily imported goods should be considered as smuggling.

3.24. Appeals for revocation

It is proposed to specify that when processing appeals for revocation, taxpayers who submit any type of information and documentation in a language other than Spanish to the tax authority must attach the appropriate translation.

It is also established that the deadline for complying with the resolution of a revocation appeal will be 30 days and not 15, unless the taxpayer contests the resolution.

3.25. Guarantee of the tax interest

It is proposed to establish that seizure in administrative proceedings, in order to guarantee the tax interest, may not be executed on intangible assets, such as trademarks, since they do not represent a suitable means to recover tax debts. Rural properties are also excluded, since their characteristics are generally irregular and they are difficult to dispose of for the recovery of a tax debt.

3.26. Credit portfolio seizure

The seizure of credits will be notified directly by the tax authority to the debtors of the seized taxpayer, and they will be required to inform them of the characteristics of the contractual relationship with the taxpayer, and warned that if they do not appear within 3 days, a fine will be imposed; they will also be required not to pay the respective amounts to the taxpayer (creditor/seized) but to the tax authority, and warned of double payment in case of disobedience.

3.27. Publication of the notice of auction

It is proposed to make clarifications related to the publication of the notice of the auction procedure on the tax authorities' website, as the current rule establishes that public auctions shall be carried out through electronic means.

3.28. Auction of goods

It is proposed to specify that the auction will be considered closed until the winning bidder makes full payment of the bid offered, as well as to incorporate the payment of the balance of the amount offered by bank deposit, in order to facilitate payment to the bidder.

  1. Law on Special Tax on Production and Service (LIEPS)

4.1. Complementary quota scheme applicable to those foreseen for motor fuels

The Executive's reform bill proposes to establish counter-cyclical instruments to strengthen public finances by adjusting STPS quotas in accordance with the economic variables that have been defined and by applying complementary quotas, which represent the difference between the base prices updated for inflation of gasoline and diesel and the reference prices of these fuels.

In this regard, it is proposed that the Ministry of Finance and Public Credit publish the supplementary IEPS quotas applicable to the sale of gasoline, diesel and non-fossil fuels on a weekly basis.

  1. Other Considerations

5.1. Reportable schemes (REMINDER)

It is important to note that the deadlines for complying with the obligations of reportable schemes will start to run from 1 January 2021.

In this regard, the obligation to provide information on topics that the tax authorities have identified as areas of risk during the exercise of their powers, establishing the disclosure of reportable schemes in Mexico, is in force as of 2020.

The obligation to disclose reportable schemes will apply to those schemes that arise from 2020, or earlier, when their tax effects will be reflected from that year. In the latter cases, only the part of the reportable scheme whose tax effects are reflected from 2020 onwards shall be disclosed, and the obligation shall be borne solely by the taxpayer.

In general terms, reportable schemes are those that can generate (directly or indirectly) a tax benefit in Mexico and have some of the characteristics identified by the authorities as risk areas.

Risk issues subject to reporting include:

  • those related to REFIPRES,
  • tax loss carry forward,
  • EP generation,
  • use of hybrid mechanisms,
  • labour subcontracting, among others.

It is established that the main obligors will be the tax advisors who will have to submit an informative declaration, in which they will disclose the general data of the tax advisor, the beneficiary of the scheme, a detailed description of the scheme, a mention of the tax benefits and financial information.

The SHCP shall issue a secretarial agreement determining the parameters on minimum amounts in respect of which the mandatory disclosure rules shall not apply.

On the other hand, it is established that the mere failure to submit a reportable scheme would interrupt the expiry of the tax authorities' powers to review taxpayers' obligations or to assess taxes payable by them.

It should also be borne in mind that a tax advisor shall mean any natural or legal person who, in the ordinary course of business, is responsible for or involved in the design, marketing, organisation, implementation or administration of a reportable scheme.

If several tax advisors are obliged to disclose the same reportable scheme, they shall be deemed to have complied with the obligation if one of them discloses such scheme in the name and on behalf of all of them. Where a tax advisor, who is a natural person, provides tax advisory services through a legal entity, it shall not be obliged to disclose schemes, provided that such legal entity discloses the reportable scheme because it is considered a tax advisor.

In the event that a scheme generates tax benefits in Mexico but is not reportable or there is a legal impediment to its disclosure by the tax advisor, the tax advisor shall issue a statement to the taxpayer justifying and stating the reasons why it is not reportable or there is an impediment to disclosure, which shall be delivered within 5 days following the day on which the reportable scheme is made available to the taxpayer or the first event or legal act that forms part of the scheme takes place, whichever occurs first.

It is also important to mention that taxpayers are obliged to disclose reportable schemes when the tax advisor does not provide the tax advisor with the identification number of the reportable scheme; when the reportable scheme has been designed, organised, implemented and administered by the taxpayer; when the taxpayer obtains tax benefits in Mexico from a reportable scheme that has been designed, marketed, organised, implemented or administered by a person that is not considered to be a tax advisor; when the tax advisor is a foreign resident without a permanent establishment in Mexican territory, as well as when there is a legal impediment for the tax advisor to disclose the reportable scheme and when there is an agreement between the tax advisor and the taxpayer that the taxpayer is obliged to disclose the reportable scheme.

The SAT will keep a register of tax advisors, classifying the types of generalised and personalised tax schemes, and will identify them with a number to be included in taxpayers' tax returns.

In addition, tax authorities may carry out home visits to tax advisors in order to verify that they have complied with their obligations in terms of reportable schemes.

However, to date, the tax authority has yet to issue the provisions or administrative rules related to the specific or exact requirements that must be met in order to file the corresponding information and informative return, or the manner in which it must be done; however, it should be considered that taxpayers must comply with the following:

  • Report the general details of the taxpayer, its tax advisor and the parties involved, indicating which of them have been created or incorporated in the last two calendar years, or whose shares or participations have been acquired or disposed of in the same period.
  • Detailed description of the reportable scheme and the applicable domestic or foreign legal provisions, including each of the stages that make up the plan or project.
  • Report a detailed description of the tax benefit obtained or expected to be obtained.
  • Fiscal years in which the scheme is expected to be implemented or has been implemented
  • Provide additional information as required by the authority.

In addition, it should be reported when it is considered that the reporting obligation does not apply, explaining the reasons why the transaction is not reportable.

The disclosure of a reportable scheme does not imply acceptance or rejection of its tax effects by the tax authorities. The information submitted, which is strictly indispensable for the operation of the scheme, may in no case be used as background information in the investigation for the possible commission of tax offences, except in the case of smuggling offences and offences related to the issuance, alienation, purchase or acquisition of tax invoices covering non-existent or simulated operations, as well as illicit enrichment.

In the case of tax advisors, non-compliance with their reporting scheme obligations can amount to as much as $20 million pesos.

On the other hand, the following conducts are offences committed by taxpayers related to the disclosure of reportable schemes; however, any fine imposed may be challenged by means of a tax defence or lawsuit.

The infringements and fines are as follows:

  • Failure to disclose a reportable scheme, incomplete or erroneous disclosure. Information is considered to be incomplete or with errors when the lack of such information or incorrect data substantially affects the analysis of the reportable scheme. Failure to comply with the above implies a sanction consisting of not applying the tax benefit provided for in the reportable scheme and a financial penalty equivalent to an amount between 50% and 75% of the amount of the tax benefit of the reportable scheme that was obtained or would be applied or expected to be obtained in all the fiscal years that the application of the scheme would imply.
  • Failure to include the identification number of the reportable scheme obtained directly from the tax authority or through a tax advisor in the taxpayer's tax return. Failure to do so will result in a fine of $50,000 pesos to $100,000 pesos.
  • Failure to comply with the request for additional information made by the tax authority or falsely declaring that it does not have the required information on the reportable scheme. Failure to comply with the above implies a fine of $100,000 pesos to $350,000 pesos.
  • Failure to report any change that occurs after the disclosure of the reportable scheme or reporting such change untimely. Failure to do so carries a fine of $200 thousand pesos to $2 million pesos.
Administrative Facilities CDMX 2560 1440 brouoadmin

Administrative Facilities CDMX

Given that the conditions of the COVID 19 force majeure health contingency prevail, which gave rise to the Agreement dated 20 March and its amendments dated 17 and 27 April, as well as 18 May, all of 2020, the Government of the CDMX has again amended the aforementioned Agreements in order to continue with the necessary measures to prevent the spread of the virus and to safeguard the health of its inhabitants.

 

Therefore, on 29 May 2020, the aforementioned amendment was published, suspending the terms and deadlines inherent to the administrative procedures and formalities that are developed before the Dependencies, Decentralised Bodies, Mayors' Offices and Entities of the Public Administration of the CDMX and granting administrative facilities for the fulfilment of tax obligations, to prevent the spread of COVID-19.

 

As a consequence of the above and for legal and/or administrative purposes, the days referred to between 1 June and 09 August 2020 shall not be counted as working days in the calculation of the terms, so that any action, promotion or request that may be made before the Public Administration of the CDMX or in the Mayors' Offices, on any of the aforementioned non-working days, shall be effective until 10 August 2020.

 

In this regard, CDMX government employees will return to work on 10 August 2020, except for the personnel necessary to attend to the activities that are exempt from the suspension of terms and deadlines indicated, which will be carried out by means of an appointment schedule and through electronic means, and which are as follows:

 

  • Urban development, construction and real estate formalities
  • Granting of instruments related to real estate before notaries public corresponding to the issuance of certificates of existence or non-existence of encumbrances via telematic means and certificates of folios, certificates of property and water debts, single certificates of land use zoning, sheets to accredit the cadastral value, registration of commercial appraisals in SIGAPRED, consultation of notarial instruments and issuance of certified copies and testimonies, apostille and/or legalisation of documents.
  • Granting, monitoring, termination and revocation of Temporary Revocable Administrative Permits.
  • Administrative recoveries of the real estate of the public domain of the CDMX in terms of the Ley del Régimen Patrimonial y del Servicio Público (Law of the Patrimonial Regime and Public Service).
  • Evaluation, modernisation and administrative development procedures that can be processed electronically.
  • Audit activities that, within the scope of its powers, are carried out by the Treasury of the Secretariat of Administration and Finance of the CDMX, such as: notifications, summons, summons, requirements, agreements, proceedings, initiation and substantiation of the Administrative Enforcement Procedure and acts of verification.
  • Administrative procedures related to the activities of the CDMX Reconstruction Commission, opening its official office, empowering the Commission to issue requirements to construction and supervisory companies, as well as to request private parties in any aspect and to continue with expropriation procedures that had been initiated before the declaration of the sanitary emergency.

 

In the case of tax proceedings, the suspension shall be terminated in accordance with the guidelines or agreements issued by the bodies or authorities that are dealing with them.

 

Likewise, with respect to the processing and substantiation of the Recurso de Revocación, provided for in the Tax Code of the CDMX, taxpayers may process the same, in the "Online" modality.

 

Likewise, the electronic means of payment implemented by the Secretariat of Administration and Finance of the Government of the CDMX will remain in operation.

 

On the other hand, the Ministry of Labour and Employment Promotion may carry out the extraordinary labour inspections it deems necessary when it becomes aware, by any means, of workplaces that may be in violation of labour legislation during the Health Emergency derived from the pandemic.

 

Likewise, the Procuraduría de la Defensa del Trabajo de la CDMX may continue the activities corresponding to the elaboration of agreements for the termination of the labour relationship, payment of benefits and the fulfilment of agreements entered into prior to the suspension.

 

Now, in terms of administrative and fiscal facilities, in the case of the Tax on Vehicle Ownership or Use whose expiry date for obtaining the subsidy was 31 March 2020, an extension is granted for its respective remission until 30 June of the same year.

 

Likewise, with regard to obtaining the 100% tax subsidy on the payment of the Tax on Vehicle Ownership or Use corresponding to fiscal year 2020 to those non-profit individuals or legal entities that own or use vehicles, whose value including Value Added Tax after applying the depreciation factor is up to $250,000.00, in accordance with the provisions of the General Agreement Granting a Tax Subsidy for the Payment of the Tax on Vehicle Ownership or Use, published in the Official Gazette of Mexico City on 31 December 2019, an extension is granted to obtain the respective benefit until 30 June of this year.

 

In this regard, the Ministry of Administration and Finance, through the Mexico City Treasury and in accordance with the information published for this purpose on its website available at http://www.finanzas.cdmx.gob.mx/, will gradually resume its activities during the aforementioned suspension period.

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SAT Suspends Deadlines and Legal Terms: COVID-19

Image from https://www.elcontribuyente.mx/2017/06/que-es-el-sat/

On 12 May 2020, the First Resolution of Amendments to the Miscellaneous Tax Resolution (RMF) for 2020 was published, which will enter into force on 13 May 2020.

 

One of the most relevant aspects of the Modification Resolution in question is the suspension of deadlines and legal terms to be implemented by SAT, due to the force majeure sanitary contingency COVID 19, established in Rule 13.3.

 

Rule 13.3. states that the aforementioned suspension will be applicable from 4 to 29 May 2020, in certain acts and procedures that must be carried out by and before the SAT, provided that they cannot be carried out by electronicmeans.

A. The acts and procedures subject to suspension are the following:

  1. Presentation and resolution of the appeal for revocation or non-conformity.

 

In this regard, it is important to mention that in accordance with Article 121 of the CFF and the taxpayer's taxpayer's taxpayer card 192/CFF of Annex 1-A of the RMF, the revocation appeal is only processed through the taxpayer's mailbox, so that in the first instance the suspension of deadlines is not applicable in the case of the revocation appeal, except in the cases indicated in the aforementioned taxpayer's taxpayer card 192/CFF and which correspond to the revocation appeal procedures that are carried out in person, which are the following:

  • The promotions and procedures of parties that are not obliged to register with the RFC
  • Those filed with the tax authorities of the federative entities,
  • Those who are not obliged to apply for an e.signature Certificate

 

In this regard, the aforementioned Form 192/CFF states that such appeals must be filed with the corresponding General Administration and shall be made in writing before the administrative unit of the SAT or of the corresponding federal entity, in accordance with the following:

  • If you are a taxpayer under the jurisdiction of the General Administration of Large Taxpayers, go to Avenida Hidalgo No. 77, module III, ground floor, colonia Guerrero, alcaldía Cuauhtémoc, C.P. 06300, Mexico City, from Monday to Friday from 8:00 am to 2:30 pm.
  • If you are a taxpayer under the jurisdiction of the General Administration of Hydrocarbons, go to Valerio Trujano No. 15, module VIII, ground floor, colonia Guerrero, alcaldía Cuauhtémoc, C.P. 06300, Mexico City, from Monday to Thursday from 8:00 am to 2:30 pm and from 3:30 pm to 4:30 pm, and on Fridays from 8:00 am to 2:30 pm.
  • Before any office of the Tax Administration Service, in the case of taxpayers who fall under the jurisdiction of the General Legal Administration.

 

On the other hand, the non-conformity appeal referred to in the Modification Resolution is not the IMSS or INFONAVIT non-conformity appeal, but rather the one related to Article 11-A of the Fiscal Coordination Law, which is filed by taxpayers against non-compliance with any provision emanating from the fiscal coordination system; However, this appeal is filed in accordance with the rules of the CFF appeal for revocation, i.e., it is also filed in the tax mailbox, so in the first instance the suspension would not be applicable, taking into account that the suspension applies in cases where the acts or procedures cannot be filed electronically.

 

Now, continuing with the appeal for revocation, it should be noted that section V of Section A of Rule 13.3, refers to several assumptions of suspension of deadlines, including, among others, that the processing and filing of the appeal for revocation is suspended (including the appeal for revocation of an exclusive decision on the merits); however, the main premise refers to the suspension of those appeals that are not filed electronically, so in our consideration, sections I and V are contradictory, and in their case the suspension only applies to the cases of appeals for revocation that are filed in person.

 

  1. Dismissal and conclusion of customs proceedings.
  2. Commencement or conclusion of the exercise of the powers of verification, verification acts, as well as the drawing up of the reports to be issued within the same.
  3. Presentation or resolution of applications for permits, authorisations, concessions, registrations or registrations; as well as the initiation or resolution of procedures for their suspension, cancellation or revocation.
  4. The procedures or issuance of acts provided for in the Fiscal Code of the Federation mentioned below:
  1. Article 34: 3-month deadline for resolving queries
  2. Article 34-A: Deadline for resolving consultations on transfer pricing methodologies
  3. Article 36: Processing and resolution of administrative reviews
  4. Article 41: Summonses and issuing of fines (control of obligations)
  5. Article 41-A: Requests for clarification of information in declarations
  6. Article 42, antepenultimate paragraph: Regarding the action corresponding to summoning taxpayers to inform them of facts or omissions derived from the exercise of verification powers.
  7. Articles 46 and 46-A: Conduct and conclusion of home visits
  8. Article 48: Conduct and conclusion of desk reviews
  9. Article 49: Development and revisions in the field of tax vouchers.
  10. Article 50: Time limits for issuing decisions derived from the powers of verification.
  11. Articles 52 and 52-A: Audits of Certified Public Accountants
  12. Articles 53 and 53 -A: Time limits for providing documentation in reviews of opinions with the Certified Public Accountant.
  13. Article 53-B Electronic reviews. In this regard, this suspension seems incongruent with the main premise of the suspension of time limits in Rule 13.3, since this procedure is purely electronic, and therefore should not be subject to suspension.
  14. Article 63: 15 days for taxpayers to comment on documents obtained from other authorities.
  15. Article 67: Power of the authority to assess taxes and accessories (no lapse of powers of the tax authorities)
  16. Article 69-D: 20 days for the authority to state whether or not it accepts the terms of the conclusive agreements (this power of suspension was to be determined by the Prodecon and not by the SAT).
  17. Article 121: Filing of the appeal for revocation. In this regard, we consider that there are inconsistencies in Rule 13.3 on the suspension applicable to the appeal.
  18. Commencement or conclusion of the exercise of the powers of verification, verification acts, as well as the drawing up of the reports to be issued within the same.
  19. Article 133-A: Compliance with the decision on the appeal for revocation.
  20. Article 133-F: Oral hearing of experts applicable in the appeal for reversal.
  21. Presentation, processing, attention, execution or formulation of the promotions, requirements or actions that must be carried out in the substantiation of the acts referred to in the previous points.

 

B. Acts not subject to suspension:

On the other hand, Rule 13.3 states that the following are not included in the suspension of legal terms and periods; however, it is important to mention that the Rule indicates that the list is enunciative but not limitative, which generates legal uncertainty, since the authority may consider other acts not included in the list of the Rule.

 

The acts for which there is no suspension are:

  • Submission of declarations, notices and reports.
  • The payment of contributions, products or benefits.
  • The return of contributions.
  • Acts relating to the administrative enforcement procedure.
  • Acts relating to the entry into and exit from the national territory of goods and the means by which they are transported or conveyed, including those relating to compliance with non-tariff regulations and restrictions.
  • Taxpayer assistance and guidance services, including registration and notifications with the Federal Taxpayers' Register (RFC).

C. Other acts and procedures subject to suspension (Article 28, third paragraph, of the Federal Law on Administrative Procedure)

 

Other acts and procedures in which the computation of legal deadlines and terms is suspended, provided that they cannot be carried out by electronic means, are the following:

  • Those related to compliance with the purpose of the Federal Law for the Prevention and Identification of Operations with Illicit Proceeds.
  • The initiation and conclusion of verification in the follow-up and compliance with the Self-Regularisation Programmes.
  • Presentation and resolution of the promotions, requirements or actions that must be carried out in the substantiation of the procedures established in the Federal Law of State Patrimonial Responsibility.

 

Finally, in the event that the authority notifies any of the acts or procedures in which the deadline is suspended, this act will be understood to have been carried out on the first working day of June 2020.

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Extension of the Suspension of Jurisdictional Activities

In view of the health emergency situation due to force majeure as a result of the disease generated by COVID-19, which persists to this day, the first, second and third agreements of agreement SS/11/2020 are amended as follows to extend the suspension of jurisdictional activities at the Federal Court of Administrative Justice for the period from 6 to 29 May 2020, so that these days are considered non-working days and no deadlines or procedural terms will run.

 

In view of the fact that the administration of justice is an essential activity, the establishment of temporary guards in some Regional Chambers had been determined in order to attend to and resolve urgent requests for precautionary measures or suspension of the challenged act in the region; and the possibility of holding remote sessions of the Plenary and Sections of the Superior Chamber; and of the Board of Government and Administration. The above agreement establishes that, if the number of requests in a region is too many to be attended to by public servants, the Board of Government and Administration may determine that other Magistrates should participate in the duty, as well as the personnel required. The plenary session of this Board will meet remotely on a regular basis during the month of May of the current year, through the video conference system.

 

A fourth agreement has been added to take into account the essence of the activity, which states in part: "Guidelines will be issued by the Board of Government and Administration to the effect that work may be carried out in-house by certain public servants, both in the Superior Chamber and in the Regional Chambers, for example: formulation of draft judgments; making public versions of judgments already issued, among others."

 

"In issuing the guidelines, the Governing and Administrative Board shall consider, among others, the following guidelines: 1. No more than two persons may enter a conference room per day, and they must keep a healthy distance; 2. The confidentiality of the information shall be protected at all times; 6. The technological means made available by the corresponding area of the Tribunal shall be used; and, 7. The health measures issued by the competent authorities shall be taken into consideration.

 

The agreement enters into force on 7 May 2020 and will also be published on the Court's website.

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Hydrocarbon tax incentives

Since December 2019, oil prices in international markets have fallen, reducing their value by more than 70%, which translates into lower revenues from hydrocarbon sales. For this reason, in December 2019, reforms to the Hydrocarbon Revenue Law were published in the Official Journal of the Federation, in which articles 39, first paragraph and 42, first paragraph were amended in relation to the Assignees, so that the decree published on Tuesday 21 April 2020, temporarily modifies these legal provisions and grants them a fiscal stimulus..

 

Object

The tax incentive is granted to Assignees obliged to pay the hydrocarbons profit sharing fee and consists of a credit equivalent to the result of multiplying 28% of the difference resulting from reducing the value of the hydrocarbons extracted during the fiscal year in question, including the consumption of these products, spills or burns, the incentive will be creditable against the profit sharing fee to be paid in terms of the Hydrocarbons Income Law.

 

Annual Payments

The stimulus shall not exceed:

  • The amount to be paid in the year, after crediting the provisional payments actually paid for the duties for the year 2020 and offsetting any credit balances.
  • Of the amount of 65 billion pesos.

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

 

Monthly Payments

The above incentive shall not exceed:

  • The amount to be paid in the period in question, having credited any provisional payments paid and offset any balances in favour.
  • The amount resulting from multiplying the number of months comprising the period in question by the quotient of 65 billion pesos divided by 12.
  • The tax incentive will be applicable for the fiscal year 2020 and will not give rise to a refund and will not constitute cumulative income for tax purposes.
  • The decree will be in force until 31 December 2020.
Extraordinary Actions to Combat COVID-19 2560 1440 brouoadmin

Extraordinary Actions to Combat COVID-19

Following the decree issued by the Ministry of Health (hereinafter SS) in the Official Gazette of the Federation (hereinafter DOF) on 31 March 2020, the agency issued in the evening edition of the DOF dated 21 April this year, a modification of the same decree, aiming to undertake extraordinary actions to combat SARS-CoV2 (COVID-19). The amendments are summarised as follows:

 

Object:

Based on the results that the Scientific Advisory Group presented to the General Health Council in plenary session on 20 April 2020, it is deemed necessary to maintain and extend the National Healthy Distance Day until 30 May 2020, ensuring the adequate implementation of safety measures.

 

Amendments to the decree of 31 March 2020

Section I of Article 1 of that which establishes extraordinary measures for the COVID-19 health emergency is amended to read as follows:

 

  • ARTICLE ONE provides for the following amendment:
    • The immediate suspension, from 30 March to 30 May 2020, of non-essential activities is ordered in order to mitigate the spread and transmission of the SARS-CoV2 virus in the community, to reduce the burden of disease, its complications and death from COVID-19 in the population residing in the national territory; ...".

 

A Third, Fourth, Fifth and Sixth article is added to the aforementioned agreement, which in summary state the following:

 

  • ARTICLE THREE" describes that the extraordinary actions of section I, of article "FIRST", will cease to be implemented as of 17 May 2020 in the municipalities of the country that present low or null transmission of COVID-19, BEING THE SS who:
    • Define criteria for assessing the intensity of transmission or any factor related to the propagation of transmission.
    • It will establish guidelines to reduce mobility between the above-mentioned municipalities.
    • The restriction on the mobility of persons considered to be in the "risk group" is maintained in the municipalities indicated.
  • For "ARTICLE FIVE", the governments of the federative entities are instructed to:
    • Update the daily occupancy, availability and care report for "Severe Acute Respiratory Infection" or other as deemed necessary by the SS.
    • Implement measures to prevent and control the disease in accordance with the general criteria issued by the SS.
    • Establish and implement mechanisms to reduce the mobility of inhabitants between municipalities with different degrees of sprawl, the Federal Public Administration may cooperate with the federal governments.
    • Ensure adequate and timely implementation of the above measures and report to the SS on their follow-up.
  • Finally, the "SIXTH ARTICLE" declares that state governments are obliged as the health authority to execute and supervise hospital conversion and expansion plans to guarantee adequate and timely care for the population.

 

The decree enters into force on 21 April 2020.

Facilities for the Payment of Workers' and Employer's Contributions: IMSS 2560 1440 brouoadmin

Facilities for the Payment of Workers' and Employer's Contributions: IMSS

The IMSS Technical Council issued the communiqué No. 191 dated 13 April 2020, in which it disseminates the legal and administrative instruments to facilitate the correct payment of worker-payrollers' contributions. In this regard, it is important to mention that the legal and administrative instruments in question are legal figures that are already established by law, and that in reality do not constitute extraordinary support or support implemented due to the contingency, but rather have the objective of orienting employers of companies with special circumstances and that in some way have been aggravated by the COVID-19 contingency.

  1. Agreement for payment in instalments of IMSS contributions (articles 40-C and 40-D LSS). The payment of employer contributions can be paid in 48 monthly instalments, provided that an initial amount of 20% of the employer's contribution and 100% of the worker's contribution is paid, and the rest in the months mentioned above. The historical amount of the quota is not modified, but it generates updating and surcharges. The interest rate per monthly term is between 1.26% and 1.82%, depending on the chosen term (12, 24 and more than 24 months) from the moment the agreement is signed and formalised. No guarantee is required.

For such purposes, the request for deferred payment or payment in instalments must be submitted to the administrative unit that controls the employer registration of the interested party and must include the totality of the tax credits payable by the employer, using the form authorised for such purpose by the Institute, signed by the employer or his legal representative, attaching a copy of official identification in the case of an individual employer, or a copy of the company's articles of incorporation, a copy of the power of attorney of the legal representative and an official copy of his identification, in the case of a legal entity.

Prior authorisation from the IMSS will be required for payment in instalments or deferred payment in the case of the following employers:

  • Controlling and controlled companies, in terms of the LISR
  • Institutions or entities regulated by the Laws on Credit Institutions, General Law on Mutual Insurance Institutions and Companies, Federal Law on Bonding Institutions, Law on Retirement Savings Systems, General Law on Auxiliary Credit Organisations and Activities, Law on the Securities Market and Law on Investment Companies;
  • Decentralised bodies and majority state-owned companies;
  • Employers with more than 300 employees, and
  • In the case of tax credits determined in the exercise of the Institute's powers of verification.

The application must be accompanied by a report on cash flow in cash and banks for the two months prior to the month in which the application is submitted and a liquidity report, projected for a period equal to the number of instalments requested. IMSS may also request additional documentation for the authorisation of the application.

The application and/or authorisation may be cancelled in special cases; in this respect, in terms of the communiqué, no guarantee will be required; however, non-payment or the employer's risky financial situation may lead to the cancellation mentioned above.

  1. Reduction of relevant fines. Applicable fines may be reduced, provided that the commitments are fulfilled.
  2. Discount of up to 7 days for absences (article 31 LSS). In cases of absence of the worker where the employment relationship subsists, paying the contribution corresponding to the sickness and maternity insurance during these days.
  3. Suspension of certain administrative and legal activities. Due to the COVID 19 contingency, the period between 31 March 2020 and the date on which the Technical Board determines that the contingency has ended shall be non-working days for the performance of actions, proceedings, hearings, notifications or requirements.

If applicable, it is recommended that you review with your ECOVIS Quibrera Saldaña consultant the specific situations of each employer and the corresponding requirements under the terms of the social security legislation.

View or download the document here.

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