Approval by the Senate of the Multilateral Agreement to Implement the Measures Related to Tax Treaties to Prevent Base Erosion and Profit Shifting (MLI), developed by the Organization for Economic Cooperation and Development (OECD). This according to official information from the Senate of the Republic.

Background that led to the approval of the agreement

Derived from Action 15 of the BEPS Report, which consists of developing a Multilateral Instrument (MLI) to amend tax treaties in order to effectively apply the measures to combat base erosion and profit shifting contemplated in tax treaties, the MLI was created to include in existing bilateral tax treaties measures to prevent treaty abuse by multinational companies and the artificial use of permanent establishment status, as well as to improve the dispute resolution mechanism of such treaties.

In this regard, it should be noted that Mexico signed the MLI in 2017 and on October 12, 2022 the Senate ratified the MLI, so it must be sent and deposited with the OECD for its signature and subsequent entry into force, with the expectation that it will be effective as of 2024.

The MLI will be included in each tax treaty entered into by Mexico (except for the United States of America and Germany) to form part of it, functioning as a protocol to interpret and execute the treaty in question and the MLI as a single document.

The entry into force of the MLI will have effects on transactions with foreign residents, so it is important to comply with its provisions in order to have access to the benefits of the treaties and at the same time not have contingencies to deduct the respective payments.

Objectives of the Multilateral Convention

• To clarify the concepts of the treaties for a better application and to avoid abuse, among others, in matters of residence, benefits and permanent establishment.
• Efficient mechanisms for disputes that may arise between governments.
• Simplify benefits
• Establish mechanisms to avoid treaty shopping, or the search for structures whose sole purpose is to benefit from the treaty without any justification of the need for the operation or without a business reason.

Highlights of this document

• Establish requirements for people to be able to apply for treaty benefits, under the concept of "eligible persons", so that residency will not be sufficient.
• It may involve changes in domestic legislation regarding methods to avoid double taxation.
• It may involve planning constraints for people who have investments abroad.
• Addresses issues of dual residence, beneficial ownership, related third parties, split contracts for permanent establishment issues.
• The principle of good faith is maintained, but this does not prevent the analysis of income that is not taxed at source (business profits), in order to review whether or not the benefits of the treaties are applicable.
• Each country may establish its own reservations, and information exchange and information sharing agreements between authorities should be considered.
• It incorporates sections for arbitration in case of disputes.

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The SAT expands its opening hours and service spaces for taxpayers.

Economic Package 2023

The Tax Administration Service (SAT) by means of communication 049/2022 dated October 2 has determined to extend the hours and space of attention for taxpayers, especially to legal entities which will be attended on "Fridays, from October 7 to December 30, 2022, from 9:00 a.m. to 4:00 p.m., by appointment", unfortunately this wording causes confusion, since it is not understood if Monday to Thursday will be attended to legal entities, being Fridays exclusively for them; the above would be inappropriate:00 to 16:00 hours, by appointment", unfortunately this wording causes confusion, since it is not understood if from Monday to Thursday it will attend to legal entities, being Friday exclusive for these; the above would be nonsense, because it would reduce the effective attention times. Now, if in addition to the normal schedule from Monday to Thursday, the SAT will provide extraordinary service on Fridays only to legal entities, it will be relieving a severe delay in the procedures of these persons, which has accumulated since 2020, however, individuals would be affected by not having service on Fridays.

Use of a mobile office by the Tax Administration Service (Servicio de Administración Tributaria)

In a second point, SAT has decided to use again the mobile office mechanism, bringing the services and procedures of the institution in remote areas to the taxpayer service offices; this plan will begin at first for the entities of Oaxaca, Quintana Roo, Sinaloa and Veracruz to serve individuals, mainly; in a second stage, Monterrey, Guadalajara, Cancun, Merida, Tijuana, Ciudad Juarez and Mexico City, being again the legal entities the most benefited.

It is correct to reduce the severe backlog in terms of taxpayer service, which was affected by the pandemic, but the SAT must take care that this plan does not severely affect the services to individuals and above all, it must improve in the final attention to the taxpayer, since many times the officials themselves do not know in depth the procedures they are receiving.

Click here to read the press release.

By: Benjamín Segura | Sr. Legal Tax Consultant

Source: https://www.gob.mx/sat/prensa/el-sat-amplia-sus-horarios-y-sus-espacios-de-atencion-para-los-contribuyentes-049-2022

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Economic Package 2023

Senate approves the Multilateral Convention

The Secretary of Finance and Public Credit delivered the 2023 Economic Package to the Congress, which includes the Expenditure Budget Bill (PEF), the Federal Income Law Initiative (LIF) and the General Economic Policy Criteria.

Initiatives in this package

Among the initiatives in the 2023 package are the following: 

• Gaceta Parlamentaria, Chamber of Deputies, FINANZAS PÚBLICAS (hacienda.gob.mx)
• Annex A of the Federal Revenues Law for Fiscal Year 2023 (LIF)
• Annex B With the proposed Budget of Expenditures of the Federation for Fiscal Year 2023 (PEF)
• Annex C General Economic Policy Criteria for the initiative of the Revenue Law and the proposed Budget of Expenditures of the Federation for the fiscal year 2023
• Annex D Amending, adding and repealing various provisions of the Federal Law of
• Annex E Adding various provisions of the Federal Budget and Fiscal Responsibility Law
• Annex F Methodological note on the identification of priority attention zones 2021; and proposal for the declaration of priority attention zones 2023.
• Annex G Report on the use of the power conferred to the Federal Executive in tariff matters, submitted in accordance with Article 131 of the Political Constitution of the United Mexican States.
• Annex H List of Rural Priority Focus Areas 2023
• Annex J List of urban priority focus areas 2023
• Annex K Estimated amount of federal resources to comply with the housing subsidy policy for fiscal year 2023

From the above, it is clear that this year there are no initiatives by the Executive with proposals to change or reform laws on tax collection matters such as the Income Tax Law (LISR), Value Added Tax Law (LIVA) and the Federal Tax Code (CFF) that make up the Tax Miscellaneous, which will only update fees and rates for inflation, so taxpayers will not face structural reforms for 2023, and there will be no tax increases either.

The deadlines for approval of the LIF are October 20 and 31, by the Chambers of Deputies and Senators, respectively, and for approval of the PEF by the Chamber of Deputies on November 15.

Highlights to consider

Among the highlights of the package are the following:

It was noted that the PEF for Fiscal Year 2023 has been carried out under the principles of austerity, efficiency and rationality in spending, being congruent with income and macroeconomic variables, all in sustainable balances, presented in the General Economic Policy Criteria 2023, prioritizing social programs with a base of healthy public finances and without macroeconomic imbalances.

It was also emphasized that the tax base will continue to be strengthened through measures against tax evasion and avoidance, as these measures have increased revenues without the need to create new taxes or increase existing ones.

Finally, it is estimated that public debt will remain on a stable and sustainable trajectory, respecting the fiscal targets and debt ceilings established by Congress, to reach 49.4% of Gross Domestic Product in 2023.

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SAT expands its hours and spaces for taxpayers

Senate approves the Multilateral Convention