Dear clients & friends,
On November 12, 2021, the Mexican authorities published a Decree in the Official Gazette of the Federation (Diario Oficial de la Federación) (the “Decree”), which amended, incorporated and repealed certain provisions of, inter alia, the: (i) LISR; (ii) LIVA; and (iii) CFF.
In such regard, below please find a summary appertaining to the relevant amendments that derived from the Decree, as well as the provisions set forth in the LIF for Fiscal Year 2022.
1. Income Tax Law (Ley de Impuesto Sobre la Renta)
A.1. Overall amendments
- Treaty implementation requirements: a new requirement was incorporated regarding the implementation of treaties concerning the avoidance of double taxation, which entails the compliance of the obligation to file audited financial statements when required for such purposes in terms of the applicable laws. (art. 4, LISR).
- New authorities and duties: The SAT is now entitled to unilaterally determine, through the issuance of general rules, whether a multipurpose financial company meets the established parameters to consider said company as part of the Mexican financial system (art. 7, LISR).
- Foreign exchange gain and interest: As a result of the Decree, the foreign exchange gains and losses may not be less than nor exceed, as applicable, the amount that would result from applying the currency exchange rate published by the Central Bank of Mexico (Banco de México) in the Official Gazette of the Federation (Diario Oficial de la Federación) appertaining to the settlement and payment of due and payable obligations undertaken in foreign currency in Mexico (art. 8, LISR).
- Back-to-back loans: The legal treatment and provisions applicable to back-to-back loans shall now be applicable to financial transactions that generate interests at the expense of legal entities or the permanent establishments in the country of foreign residents, when such transactions lack a commercial purpose (art. 11, LISR).
- Usufruct and bare ownership: A new statutory provision was incorporated, clarifying that the consolidation of the usufruct and the bare ownership constitutes a taxable event (art. 18, LISR).
- Determination of the profit derived from the sale of the usufruct and bare ownership: Regarding sale operations entailing the transfer of the usufruct or the bare ownership of assets, the profit shall be determined by subtracting from the price the tax basis (original amount of the investment), in proportion to the amount that corresponds to the transferred rights, in accordance with an appraisal conducted by an expert valuator (art. 19, LISR).
A.2. Transfer of shares
- Transfer of shares: An additional requirement was incorporated regarding the requirements that taxpayers must comply with in order for the tax authority to be entitled to authorize the transfer of shares at a tax value, entailing the obligation at the expense of the taxpayer who shall have to declare and inform to the tax authority all of the relevant transactions related to the corporate restructure operation in question, that have been executed within the five year period that immediately precedes the request in question.
For such purposes, a relevant transaction shall be deemed to be any of the following acts: (i) the transfer of the ownership of shares or of the rights to use and derive profit from shares, or of the voting and/or veto rights vested by said shares; (ii) the granting of rights over the assets or the profits of the issuing company, the acquiring company or the transferring company, due to a capital stock decrease or liquidation, at any time; (iii) the increase or decrease, as applicable, of the net book value of the issuing company’s shares by more than 30%; (iv) the issuing company, the acquiring company and the transferring company cease to consolidate their financial statements; (v) the increase or decrease of the capital stock of the issuing company, the acquiring company and the transferring company; (vi) the increase or decrease of a partner’s or a shareholder’s equity stake in the capital stock of the involved companies resulting, in turn, in an increase or decrease of the equity stake of another partner or shareholder in the issuing company; (vii) the change of the tax residence of the involved companies; or (viii) the transfer of one or more business sectors (art. 24, section XI, LISR).
A.3. Tax deductions
- Fuel deduction: In order to validly deduct the acquisition of fuels, in addition to the previous statutory provisions, the CFDI must contain the information of the fuel supplier’s current permit, with the indication that such permit has not been suspended as of the expedition date of the CFDI (art. 27 paragraph III, LISR).
- Technical assistance, royalties and technology transfer: Consistently with the labor reform, the deduction of technical assistance expenses, royalties or the transfer of technology shall only be deductible if they are rendered directly and not through third parties, except in the event that such services are subcontracted and, therefore, do not correspond to the corporate purpose nor the main economic activity of the beneficiary company, as set forth in the CFF (art. 27 paragraph X, LISR).
- Non-recoverable Credit Debts: In the case of non-recoverable credit debts that surpass 30,000 investment units (approximately $210,000.00 Pesos Mex. Cy.), it shall only be deductible if the creditor obtains a definitive ruling by the competent authority. In this regard, it is important to point out that until December 31, 2021, taxpayers were authorized to deduct those non-recoverable credit debts to the extent that they had initiated the judicial/arbitration process for their recovery (art. 27 section XV, LISR).
- Deductions of interests derived from debts with related parties: The LISR prohibits the deduction of interest payments derived from a debt contracted with related parties residing abroad, which exceed three times the taxpayer’s total equity, as it is regarded as thin capitalization.
Starting as of January 1st, taxpayers will be entitled to calculate the total equity under a new formula (art. 28 section XXVII, LISR).
|Beginning balances for the year of its capital contribution accounts
|Year-end balances of your capital contribution accounts
|Net tax profit.
|Utilidad fiscal reinvertida.
|Beginning balances of losses pending reduction
|Ending balances of losses pending reduction
|Option to consider as Stockholders' Equity
Starting as of January 1st, taxpayers will be entitled to calculate the total equity under a new formula (art. 28 section XXVII, LISR).
- Original investment amount: It is established that the original amount of the investment shall include the expenses appertaining to, inter alia, the site’s preparation, installation, assembly, handling, delivery, as well as those expenses related to the services contracted for an investment to operate.
Additionally, taxpayers shall be required to notify the tax authorities if an investment ceases to be useful (art. 31, LISR).
- Fixed asset: The acquisition of the usufruct of any real estate property shall be considered as a fixed asset (art. 32, LISR).
- Pre-operational period expenses: It is clarified that pre-operational period expenses incurred by the taxpayers engaged in extractive industries are those related to exploration and/or scouting of new sites and the quantification of new exploitable reservoirs; excluding those corresponding to intangible assets that allow the exploration or exploitation of public property assets, which constitute deferred expenses (art. 32, LISR).
The main purpose (ratio iuris) is to prevent taxpayers of the mining sector from deducting expenditures disbursed for the acquisition of mining concession titles (exploitation rights) at a depreciation rate that’s higher than the effective term of the concessions.
A.5. Financial institutions
- Notice requirement: Financial institutions that pay interests to their clients shall notify and inform the tax authorities, on a monthly basis, about the cash deposits made to taxpayers’ accounts if the accumulated deposited amount exceeds $15,000.00 Mex. Cy. (Fifteen Thousand Pesos 00/100 Mexican Currency) –which contrasts with the obligation to do so on an annual basis– (art. 55, LISR).
- Financial intermediaries: The financial intermediaries involved in the sale of shares through stock corporations that are authorized by the Ministry of Finance and Public Credit (Secretaría de Hacienda y Crédito Público) to act as a stock exchange, shall notify and inform to the SAT, no later than February 15 of each year, the name, RFC, domicile, tax identification number (RFC) and the details appertaining to the sales of shares operations (art. 56, LISR).
A.6. Losses.- Modification of the rules applicable to spin-off companies and events by which companies undergo a change of control
- Corporate spin-offs: In the event of a company’s spin-off, the pending tax losses shall be distributed among the spin-off and spun-off companies engaged in the same line of business; however, the tax authorities will be entitled to closely audit those types of transactions in order to assess they have substance (art. 57, LISR).
- Change of shareholders: New statutory presumptions are established by which it shall be deemed that there’s been a change of control of a company, in the event that, in one or more legal acts, executed within a period of 3 years as from the date of the merger: (i) there’s a change regarding the shareholders or stakeholders that, directly or indirectly, hold more than 50% of the shares with voting rights; (ii) there’s a change regarding the shareholders or stakeholders whose shareholding or equity stake allows them to unilaterally impose resolutions in the general meetings, appoint or remove directors, administrators or any equivalent, or whose shareholding or equity stake allows them to control the company’s management or policies; and (iii) after the merger, the companies cease to consolidate their financial statements (art. 58, LISR).
A.7. Primary economic activities
- Individuals with primary economic activities: The provisions related to individuals who are engaged in primary economic activities (agriculture, livestock, fishing, forestry) are repealed and, in turn, such individuals shall be subject to the provisions of the Simplified Trust Tax Regime (Régimen Simplificado de Confianza) for individuals (art. 74, 74-A y 75, LISR).
A.8. Legal entities’ obligations
- Related party transactions: Legal entities will now be required to obtain and maintain the documents and supporting evidence of the transactions entered into with related parties, whether they are national or foreign, in contrast with the previous obligation, which only applied in respect of foreign related parties (art. 76 section IX, LISR).
- Annual reports: The deadline for submitting the annual reports appertaining to the transactions entered into with related parties during the fiscal year is extended to May 15th (art. 76 section X, LISR).
- Monthly reports: A new statutory provision is incorporated entailing the obligation to report and inform to the tax authority, on a monthly basis, about the sale and transfer of shares or securities representative of taxpayer’s assets, issued by the taxpayer in question, entered into among and by foreign residents without permanent establishment in Mexico.
Said information shall include the (i) effective date of sale and transfer of the shares or securities; (ii) name; (iii) corporate name; (iv) tax identification number; (v) country of residence; and (vi) effective date on which the corresponding tax was paid as well as the amount paid for said tax (art. 76 paragraph XX, LISR).
A.9. Individuals who perceive income from professional fees
- Change of regime: It is clarified that individuals who perceive income from professional fees or from individuals with business activities and such income exceeds $75,000,000.00 Mex. Cy. (Seventy-five Million Pesos 00/100 Mexican Currency), shall begin to pay taxes under the regime for individuals with business and professional activities, and therefore will not be able to pay taxes under the regime applicable to wages, salaries and assimilated income (art. 94, LISR).
- Annual information of individuals: Individuals who pay taxes under the regime applicable to those who receive income derived from professional or business activities shall now be required to inform to the tax authorities about the transactions they execute with related parties (art. 110 section X, LISR).
A.10. Tax incorporation regime (Régimen de incorporación fiscal)
- Elimination of the Regime: As a result of the creation of the Simplified Trust Tax Regime (Régimen Simplificado de Confianza), the Tax Incorporation Regime (Régimen de Incorporación Fiscal) was repealed.
Notwithstanding the foregoing, a transitory provision establishes that taxpayers that as of August 31, 2021, pay income tax under the tax incorporation regime may continue to apply VAT and IEPS incentives, provided that they file a notice to update their economic activities and obligations before the SAT no later than January 31, 2022.
It is important to point out that in case the mentioned notice is not filed, the SAT will be solely authorized to update the RFC in order for the taxpayer to pay taxes under the terms of the new regime (art. Second Transitory, section IX, LISR).
A.11. Simplified trust regime for individuals (Régimen Simplificado de Confianza)
- Elimination of the Regime: As a result of the creation of the Simplified Trust Tax Regime (Régimen Simplificado de Confianza), the Tax Incorporation Regime (Régimen de Incorporación Fiscal) was repealed.
The foregoing, provided that the following individuals shall not be subject to the provisions set forth for the tax regime in question: (i) those who are stakeholders, shareholders or members of legal entities or they’re considered as related parties to such legal entities; (ii) those who are foreign residents with a permanent establishment in Mexico; (iii) have income subject to the provisions set forth for REFIPRE; (iv) receive income from fees as members of boards of directors, managers, statutory examiners, general managers or obtained principally from rendering services to a service provider and that arise from business activities (art. 113-E).
In addition to the foregoing, the following individuals do not qualify for the tax regime in question: (i) those who are not currently active in the RFC; (ii) those that, in case of resumption of activities, have had taxable income that exceeding $3,500,000.00 Mex. Cy. (Three Million Five Hundred Thousand Pesos 00/100 Mexican Currency) in the immediately preceding fiscal year; (iii) those that are not in compliance regarding their tax obligations, in accordance with the provisions set forth in Article 32-D of the CFF; or (iv) those that are on the list of taxpayers set forth in article 69-B of the CFF, i.e., they must not be listed as taxpayers that issue invoices for simulated operations nor taxpayers that deduct simulated operations (art. 113-H, LISR).
Income limit: The taxpayer’s income shall not exceed $3,500,000.00 Mex. Cy. (Three Million Five Hundred Thousand Pesos 00/100 Mexican Currency) in the fiscal year in question.
- If the taxpayer does not comply with the requirements established to pay taxes under this regime or if the taxpayer’s income exceeds the aforementioned amount, the taxpayer in question shall be obliged to pay taxes under the regime of individuals with business or professional activities or under the regime established for the lease or granting of rights to use and/or derive profits from assets. The tax authority will be authorized, at all times, to assign the taxpayer the corresponding tax regime (art. 113-E, LISR).
|Amount of income evidenced by tax invoices effectively collected, excluding value added tax (Pesos per month)
|Up to 25,000.00
|Up to 50,000.00
|Up to 83,333.33
|Up to 208,333.33
|Up to 3,500,000.00
|Amount of income evidenced by tax invoices effectively collected, excluding value added tax (Pesos per year)
|Up to 300,000.00
|Up to 600,000.00
|Up to 1,000,000.00
|Up to 2,500,000.00
|Up to 3,500,000.00
- Individuals with primary activities: Individuals engaged in agricultural, livestock, forestry or fishing activities, provided that their effectively collected income does not exceed $900,000.00 Mex. Cy. shall not be required to pay taxes. In the event that their effectively collected income surpasses said amount, they will be taxed for the exceeding amount subject to the terms and conditions established for the Simplified Trust Tax Regime (Régimen Simplificado de Confianza) (art. 113-E, LISR).
- Annual income tax return: Taxpayers are required to file their annual income tax return in April of the following fiscal year to which the income tax return corresponds to (art. 113-F, LISR).
- Obligations: Taxpayers who pay their taxes under the Simplified Trust Tax Regime (Régimen Simplificado de Confianza) are required to: (i) register before the RFC (ii) obtain an advanced electronic signature (Firma Electrónica Avanzada) and maintain an active tax mailbox (Buzon Tributario); (iii) Issue CFDI’s for the totality of their effectively collected income; and (iv) obtain and maintain the CFDI’s that evidence their tax deductions (art. 113-G, LISR)
- Withholding: Legal entities that execute transactions with taxpayers subject to the regime in question, must withhold 1.25% of the payment amount in question (art. 113-J, LISR).
A.12. Personal tax deductions
- Regarding the tax deductibility limit set forth for the individual’s personal tax deductions, a new statutory provision was incorporated, in terms of which the only concept that shall not be subject to such limit will be the complementary retirement contributions, repealing the exclusion that was established for non-onerous and non-remunerative donations (art. 151, LISR).
A.13. Foreign residents with income derived from a national source of wealth
- Obligations for acts between related parties: A new statutory provision was established, which entails the obligation for foreign residents to determine their income, profits, earnings and, as the case may be, tax deductions, that derive from transactions entered into with related parties, in accordance with their fair market value (art. 153, LISR).
- Obligations of trustees/fiduciaries: Trustees are required to determine the taxable income amount appertaining to foreigners who hold any equity interest in trusts convened under Mexican law (art. 153, LISR).
- Sale of real estate assets: Regarding the sale of real estate assets, in the event that the appraisal value of the real estate asset determined by the appraisal performed by the tax authority exceeds the purchase amount by more than 10%, then the buyer would trigger Mexican sourced income tax amounting to the 25% of the total difference between the appraisal value and the purchase amount, without any deduction (art. 160, LISR).
- Sale of shares and certificates: Regarding transactions executed among related parties in which a registered public accountant renders an opinion, the latter shall be required to report in the opinion the book value of the shares being sold and attach the documentation that evidences that the purchase amount of the transferred shares corresponds to the price that would have been paid for by independent parties in similar transactions.
In addition, that SAT is authorized to establish, through general rules, the cases in which withholding provisions shall not be applicable. Regarding corporate restructurings, it is established that the shares shall be deemed to be unrelated to the corporate group, when the issuing company and the acquiring company cease to consolidate their financial statements. Also, the tax authorities shall be authorized to establish additional requirements in the event of corporate restructurings (art. 161, LISR).
- Interests: The provision that stated that the interest withholding rates of 4.9% and 10% will not be applicable to beneficial owners who perceive more than 5% of interest “derived from the certificates in question” was repealed; replacing the term “issuer” with “debtor”, in order to for it not to be interpreted that said provision shall only apply if the interests in question derive from negotiable securities.
Additionally, another statutory provision was established, which entails the obligation for investment funds that carry out/disburse payments for the sale of shares, to withhold and pay the corresponding tax, and to provide information, both to the tax authority and the taxpayer in question, regarding the portion of the profit that corresponds to the shares sold in the stock market (art.166, LISR).
- Other income: A new statutory provision was incorporated, whereby it is mandatory for individuals who pay indemnities resulting from court rulings or arbitration decisions to withhold income tax (art. 172 LISR).
- Obligations of legal representatives: New requirements were included for legal representatives of residents tax residents, which entail the willingness to accept and undertake joint and several liability, and the obligation to have sufficient solvency in order to respond as a joint and several obligor.
Pursuant to the foregoing, it is expected that the SAT, by means of the issuance of general rules, will establish the applicable criteria that shall be used to determine if a legal representative has sufficient solvency for such purposes (art. 174. LISR).
A.14. Preferential tax regimes
- Determination of the existence of REFIPRE: The taxation of dividends shall not be taken into consideration, neither shall the annual adjustment for inflation nor the currency exchange gains and losses derived from the fluctuation of the foreign currency with respect to the national currency, to calculate the 75% threshold to consider that an income is subject to a REFIPRE (art. 176, LISR).
A.15. Transfer pricing
- Related party transactions: The content of the documentation to evidence that a transaction was carried out at a fair market value and is to be regarded as part of the accounting records of the taxpayer is specified.
The wording of article 179 of the LISR is amended to expressly contemplate that the arm’s length principle is applicable to individuals.
Additionally, the due date appertaining to the filing of the informative declarations of transactions executed with related parties is modified, establishing May 15 of the following fiscal year as the new due date (art. 179, LISR).
- Obligations of financial institutions: A fifth paragraph was incorporated to article 185 of the LISR, which provides that credit institutions, insurance companies and financial intermediaries shall be obliged to be registered in the registry held by the SAT, for purposes of obtaining the deductibility of deposits in personal savings accounts, insurance contract premiums based on retirement plans, as well as of the acquisition of investment funds (art. 185, LISR).
A.16. Estímulos fiscales
- Opción de acumulación de ingresos: Se derogan todas las disposiciones referentes a la opción de la acumulación de ingresos por personas morales que se encuentren constituidas únicamente por personas físicas que tributen en los términos del Título II de la LISR, cuyos ingresos totales obtenidos en el ejercicio inmediato anterior no hubieran excedido de la cantidad de $5,000,000.00 M.N., sustituyéndose por el régimen simplificado de confianza de personas morales, establecido en el Título VII, Capítulo VIII de la LISR.
A.17. Simplified trust regime for legal entities
- Qualifying taxpayers: Legal entities residing for tax purposes in Mexico, incorporated solely by individuals, whose income does not exceed $35’000,000.00 Mex. Cy. (thirty-five million 00/100 Mexican Currency) (art. 206, LISR).
- Excluded: Related parties, taxpayers that perform activities through trusts or joint ventures (asociación en participación), credit institutions, groups of companies, entities under the special tax regime for transportation activities (Régimen de Coordinados) and individuals dedicated to primary economic activities, non-obligated legal entities and those who are subject to the provisions of the tax incentives, will not be able to pay taxes under this regime (art. 206, LISR).
- Income: Income shall be considered as taxable income when it is effectively collected (Art. 207, LISR).
- Deductions: The taxpayers shall be authorized to deduct the following concepts: (i) refunds received or discounts or bonuses, provided that the corresponding income has been accrued; (ii) acquisitions of merchandise, as well as acquisitions of raw materials; (iii) net expenses derived from discounts, bonuses or refunds; (iv) investments; (v) disbursed interests derived from the activity, without any adjustment, as well as those generated from borrowed capital as long as such capital has been invested in the procurement or achievement of the activities of the legal entity and the corresponding CFDI has been obtained; (vi) employer’s contributions paid to the Mexican Social Security Institute (Instituto Mexicano del Seguro Social); and (vii) contributions made for the creation or the increase of reserves for personnel pension or retirement funds, complementary to those established by the Social Security Law (Ley del Seguro Social), and the contributions made for seniority premiums established under the terms of the Law (art. 208, LISR).
- Provisional payments: Provisional payments must be fulfilled no later than the 17th day of the immediately following month; however, the computation mechanism is replaced, establishing thereof that the income base on which they shall be determined shall be obtained by subtracting the total deductions effectively paid during the fiscal year to the sum of the income effectively collected during the same fiscal year (art. 211 y 212 LISR).
- Inventory: By means of a transitory provision it was established that taxpayers who pay taxes under the general tax regime for legal entities and that begin to pay taxes under the trust regime for legal entities, but have inventory pending to be deduced, shall continue to apply the provisions established for the cost of sales until such inventory or merchandise is depleted (art. Second Transitory, section V, LISR).
2. Value Added Tax Law (Ley del Impuesto al Valor Agregado)
B.1. Rate of 0%
- Products subject to the 0% rate: The catalog of goods subject to the 0% rate is updated by adding products for animal food, sanitary pads, tampons and menstrual cups (art. 2-A, section b), first paragraph and section j), LIVA).
B.2. Definition of the acts or activities which are NOT subject to tax
- Acts or activities NOT subject to tax: The definition of acts or activities not subject to tax is incorporated, which shall now include those acts or activities performed abroad, as well as those that, although they were performed within Mexico, are NOT included within article 1 of the LIVA, as well as when a taxpayer has paid the VAT transferred by third parties, or disbursements that are related to the obtaining of income for which said tax is not caused (art. 4-A LIVA).
B.3. VAT credit
- Crediting: Certain crediting requirements were amended, therefore: (i) VAT transferred by third parties on the acquisitions goods or services used exclusively to carry out acts that are NOT taxed, may no longer be credited; and (ii) in case assets, different from investments, are used indistinctly to perform activities for which VAT is not caused, activities subject to a 0% rate and those for which VAT is caused, the crediting will be done in a proportional manner (art. 5, section V, items b) and c), LIVA).
Regarding VAT paid for the importation of goods, the customs declaration will have to be issued in the taxpayer’s name and include the corresponding VAT payment (art. 5, section II, LIVA).
B.4. Foreign residents rendering digital services
- Digital services: The periods in which foreign residents that provide digital services have to file certain information regarding their operations with the SAT was amended, from a quarterly basis to a monthly basis (art. 18-D, section III, LIVA).
A default on this obligation may result in the temporary block of the digital service provider’s access to the digital service (art. 18-H BIS, second paragraph, LIVA).
B.5. Use of intangible assets
- Grant of temporary use: The definition for grant of use was amended, clarifying that when the granting of the use of intangible assets takes place in national territory, the tax will be triggered, regardless of the place where the material delivery was made, or the place where the legal act that caused its origin was executed (art. 21 LIVA).
3. Excise Tax (Ley del Impuesto Especial sobre Producción y Servicios)
- Fossil fuels: A paragraph was incorporated which establishes that if the customs or tax authority, in the exercise of its verification faculties, detects that due to the characteristics of the merchandise being introduced or merchandise intended to be introduced into national territory, said merchandise consists of fossil fuels, which have omitted, partially or totally, the payment of the corresponding tax, in addition to the applicable administrative and criminal sanctions, they shall be subject to an additional fee according to the type of fuel in question (art. 2, item d), LIEPS).
- Destruction of containers: a new provision regarding the destruction of containers was incorporated, by which the SAT, by means of the issuance of general rules, shall be authorized to establish the events in which the destruction of containers shall not be applicable (art. 19, section XVIII, LIEPS).
- Scanning of the QR code on alcoholic beverages: A new provision was established, entailing the obligation in charge of establishments that sale alcoholic beverages to consumers to scan, in front of the consumer, the QR code attached to the label of or printed on the containers (art. 19, section XXIV, LIEPS).
4. Federal Income Law (Ley de Ingresos de la Federación)
- Income tax withholding rate for financial institutions: The annual withholding basis by which financial institutions must withhold income tax from investments held by such institutions, was reduced from 0.97% to 0.08% (art. 21 LIF).
- Shared Utility Fee: The assignees referred to in article 39 of the Hydrocarbons Income Tax Law (Ley de Ingresos sobre Hidrocarburos) shall be obliged to pay the shared utility fee at a rate of 40% (art. 22, LIF).
5. Federal Tax Code (Código Fiscal de la Federación)
E.1. General provisions
- Tax residency in Mexico: It is now provided that legal entities, like individuals, will maintain Mexican tax residency in the event that they change it to a territory regarded as a preferential tax regime.
Likewise, the applicable time period of this prevision was extended from three to five fiscal years; additionally, an exception to this provision was incorporated, for the event that the country in which the new tax residence is accredited has an international treaty that allows mutual administrative assistance regarding the notification and collection of taxes (art. 9, CFF).
- Suspension of deadlines: The tax authorities are now authorized, by means of general provisions, to suspend the legal deadlines in the event of an unforeseen circumstance or force majeure, i.e., a pandemic like the one resulting from the SARS COV-2 virus or a natural disaster, among others (art. 12, seventh paragraph, CFF).
E.2. Merger and spin-off of companies
- Absence of business purpose: It is now provided that if the tax authorities, by means of a tax audit, detect that a merger or spin-off performed by a taxpayer lack a business purpose or fails to comply with the established requirements, they will be authorized to assess the corresponding tax for an alienation of property.
Likewise, while verifying the existence of a business purpose, the tax authorities shall be authorized to consider the relevant transactions related to the merger or spin-off, as the case may be, carried out within the five years prior to and following the merger or spin-off in question. For such purposes, relevant transactions shall be understood to include, among others (i) the transfer of ownership or use of voting or veto rights appertaining to the company involved in the merger or spin-off (merging, spin-off, spun-off); (ii) the granting of rights over assets or profits of the aforementioned companies; (iii) the increase or decrease of the shares’ book value of the aforementioned companies by more than 30%; and (iv) the increase or decrease of the capital stock of the aforementioned companies.
In connection with the foregoing, it is established that in the event that a relevant transaction is entered into, within five years after the merger or spin-off, the merging, spin-off or spun-off company, as the case may be, must submit the report referred to in article 31-A (reports regarding restructurings).
Finally, it is provided that the financial statements used to perform the merger or spin-off must be audited by a registered public accountant (art. 14-B, sixth, seventh, eight and tenth paragraph, CFF).
- Proportion of the participation in the capital stock in a spin-off: It is clarified that the obligation to maintain the same proportion of participation of the partners or shareholders representing at least 51% of the voting shares or shares of a spin-off company with respect to the “capital” of a spun-off company, is with respect to the capital stock (art. 14-B, section II, item a), fourth paragraph, CFF).
E.3. Electronic sources
- Cancellation of the digital seal certificate: The tax authority is now authorized to notify the cancellation of the digital seal certificate to those taxpayers who do amend or refute the irregularities identified by the tax authority, having passed and completed the procedure set forth under articles 17-H Bis, 69-B and 69-B Bis (art. 17-H, seventh paragraph, CFF).
E.4. Taxpayers’ rights and obligations
- Refund for tax credit balance: The minimum amount for requesting refunds of tax credit balances through the electronic format with the advanced electronic signature was eliminated; therefore, from now on, all refund requests must be electronically signed (art. 22-C, CFF).
- Autocorrection of tax situation: A provision was included which allows for the possibility of amending the taxpayers’ tax situation which are subject to the exercise of inspection faculties, by means of the equalization of the amounts they are entitled to receive from the tax authorities with the omitted taxes and accessory fees, as long as the amounts intended to be equalized have been generated and declared prior to the request. The latter shall not be applicable for: (i) the amounts that been previously denied as refunds or when the obligation to refund them expired; (ii) the amounts that the taxpayers is entitled to receive, derived from a resolution issued in an administrative appeal or a court ruling; and (iii) the remaining VAT credit balances that have previously been credited (art. 23, sixth paragraph, CFF).
- Acquisition of negotiation: A rebuttable presumption was incorporated appertaining to the acquisition of negotiation, in those cases in which it is identified that: (i) the assets or liabilities are totally or partially transferred; (ii) there is total or partial identity of the persons that comprise the management, or the controlling partners or shareholders; (iii) there is total or partial identity of legal representatives; or (iv) there is total or partial identity of suppliers, among others (art. 26 section IV, CFF).
- Registry before the RFC: All individuals of legal age must submit their application to be registered before the RFC, under the category “without economic activities”, and shall therefore not be required to submit returns or pay taxes, nor will they be subject to the applicable penalties (art. 27, fifth paragraph, CFF).
- Notices before the RFC: A new provision was incorporated entailing the obligation to include, within the notices related to the report of the shareholding or corporate structure of legal entities, the percentage of equity stake held by partners, shareholders and associates, the corporate purpose and the information of the person that exercises effective control of the legal entity.
Likewise, legal entities whose shares are placed among the general investor public, shall submit before the RFC, the information of whoever has control, significant influence or commanding power within the legal entity, as well as the names of the common representatives (art. 27, section B, section VII, CFF).
- Volumetric controls: The obligation to generate daily and monthly volumetric control information reports is incorporated, in charge of those taxpayers that manufacture, produce, process, transport, store, distribute or dispose any type of hydrocarbon or petroleum products (art. 28, section I, section B, fourth paragraph, CFF).
- Obligation to request the issuance of CFDI’s: a new provision was established, entailing the obligation in charge of merchandise exporters, that do not obtain profit or whose sale is free of charge, to request the issuance of the CFDI’s that support the transactions described said transactions (art. 29, first paragraph, CFF).
- CFDI of the taxpayer’s expenses: It is provided that in the event that CFDI’s are issued without having the justification and documentary support that evidences the corresponding refunds, discounts or bonuses before tax authorities, shall not be deducted from the CFDI’s of income of said taxpayers (art. 29, section VI, third paragraph, CFF).
- Complementary consignment note: The tax authorities are now authorized to establish the characteristics of the CFDI’s that shall be used to evidence the transportation, legal residence and possession of goods (art. 29, third paragraph, CFF).
- CFDI requirements: CFDI’s are now required to include the name or the company name of the issuer and receiver of the CFDI, the zip code of the tax domicile and the fiscal use code that the receiver shall establish on the CFDI (art. 29-A, sections I y IV, CFF).
- Cancellation of CFDI’s: Unless a shorter term is provided for, as of 2022, CFDI’s may only be cancelled: (i) in the fiscal year in which the CFDI was issued; (ii) with the acceptance of the recipients; and (iii) provided that the taxpayer has the proper justification and documentary support to justify the reason for cancellation, which must be made in accordance with the general rules issued by the tax authorities (art. 29-A, fourth and sixth paragraph, CFF).
- Conservation of documents: It is provided that the information and documentation contemplated in articles 32-B section V and 2-B Bis (account holder documentation and information) shall be kept by domestic financial institutions or foreign legal entities considered as financial institutions, for six years as of the date the information was generated or should have been generated or, as of the date that the returns related to such information were submitted or should have been submitted, as applicable (art. 30, ninth paragraph, CFF).
- Obligation to audit financial statements: A new provision was incorporated, entailing the obligation in charge of legal entities subject to the provisions of Title II of the LISR, to have their financial statements audited by a registered public accountant, if in the last fiscal year they have recorded in their normal tax return a taxable income equal or greater than an amount equivalent to $1,650,490,600.90 Mex. Cy., or those which at the closing of the immediately preceding fiscal year have shares placed among the general investor public in the stock market.
The referred amount will be adjusted in January of each year with the corresponding adjustment factor (art. 32-A, CFF).
- Information regarding controlling beneficiaries: Articles 32-B Ter, 32-B Quater and 32-B Quinquies establish the obligation in charge of legal entities, fiduciaries, settlors or trustees, in the case of trusts, as well as for contracting parties or members, in the case of any other legal entity, to obtain and maintain, as part of their accounting and to provide to the tax authorities, the information regarding their controlling beneficiaries in an authentic, complete and updated manner. Such information must be updated within 15 days after a modification occurs (art. 32–Ter, CFF).
- Obligation of the registered public accountant: Registered public accountants are obliged to report to the tax authorities if they learn that the taxpayer has defaulted with any tax and/or customs provisions or if he has performed any activity that may be considered as a tax crime (art. 52, section III, third paragraph, CFF).
E.5. Tax authorities’ faculties
- Updating of economic activities: The tax authorities are authorized to unilaterally update the taxpayers’ economic activities and obligations in the event that there are discrepancies between the description of the goods and services included in a CFDI and the economic activities registered by the issuing taxpayer (art. 29-A, section V, second paragraph, CFF).
- Appraisal of investments: The tax authorities are authorized to perform appraisals of assets or rights considered in article 32 of the LISR (investments), notwithstanding the regulatory provisions of the CFF appertaining to appraisals (art. 42, section VI, second paragraph, CFF).
- Authority to audit financial institutions: A provision was incorporated to regulate the inspection faculties of the tax authorities concerning financial institutions, trust companies, trustors, trustees, including any related third parties, as well to the information requirements that the tax authorities are entitled to request from said entities. Said requirements consist in exhibiting, at their domicile, offices of the authorities themselves or through the tax mailbox, the accounting, as well as to providing the information, other documents or reports that may be required, in accordance with the procedure set forth in article 48-A (procedure for the exercise of verification faculties of financial institutions, trustees, trustors, among others) (art. 42, sections XII and XIII, CFF).
- Simulation of acts for tax purposes: The tax authorities are entitled to determine the simulation of legal acts exclusively for tax purposes within an audit, even on a basis of presumptive elements (art. 42-B, CFF).
- Access to confidential information of third parties: It is foreseen that taxpayers may designate two legal representatives to have access to confidential information obtained from independent third parties regarding similar transactions that may affect the competitive position of such third parties, in order for the taxpayer to correct its tax situation, refute any fact or omission, or appeal the resolution determining the tax credit (art. 48, section VIII, CFF).
- Confidentiality of tax information: It is foreseen that the confidentiality of tax information will not apply to taxpayers whose digital seal certificate has been revoked by the tax authorities, unless they correct the irregularities detected by such authorities or correct their tax situation (art. 69, twelfth paragraph, CFF).
- Presumption of non-existent transactions in CFDI’s: The tax authorities are entitled to presume as non-existent the transactions in which it is found that CFDI’s have been issued to support the transactions performed by another taxpayer, during the period in which the latter has been deprived of or has been temporarily restricted the use of the digital seal certificates, without having corrected the irregularities detected by the tax authorities (art. 69-B, tenth paragraph, CFF).
- Final settlement procedure: The maximum time period of the final settlement procedure requested before the Taxpayer’s Defense Attorney’s Office (Procuraduría de la Defensa del Contribuyente) is now limited to 12 months (art. 69-C, fourth paragraph, CFF).
E.6. Tax violations and felonies
- Concealment: A new provision was incorporated which states that a registered public accountant who has had knowledge of a possible criminal conduct and has not informed the authorities, will be liable for concealment of tax crimes (art. 96, section III, CFF).
- Smuggling: It shall be assumed that the crime of smuggling is committed when the description or tariff classification of merchandise is reported inaccurately to the authorities, provided that such conduct causes the omission in the payment of taxes or countervailing fees (art. 103, section XX, CFF).
- Simulation of labor relationships / Tax fraud: The following concepts were incorporated as aggravating circumstances of tax fraud when: (i) an attempt is made to simulate the rendering of independent professional services with workers; and (ii) deducting, crediting or applying any incentive or tax benefit regarding the disbursements made in violation of the anti-corruption legislation (art. 108, seventh paragraph, items j) y k), CFF).
E.7. Administrative procedures
- Guarantee of the tax interest: The obligation to guarantee the tax interest shall be applicable to those taxpayers that request a dispute resolution procedure under a double taxation avoidance treaty, without previously having filed any revocation action (art. 142, CFF).
- Seizure of assets for enforceable credits: It is established that, as of 2022, in the case of taxpayers’ enforceable credits, the tax authorities may perform a seizure of assets, through the tax mailbox, notices or edicts, if the following are involved: (i) bank deposits, saving or investment elements associated with life insurance that are not part of the premium to be paid for the payment of such insurance, or any deposit made in the taxpayer’s account in any of the financial entities or saving and loan cooperative companies; (ii) shares, bonuses, overdue coupons, negotiable securities and certain loans; (iii) real estate; or (iv) intangible assets (art 151 Bis, CFF).
- Diligence of seizure requirement: The procedure by which the diligences of seizure requirement shall be performed was amended.
For such purposes, the designated executor shall attend to the tax domicile or, as the case may be, to the place where the debtor’s property is located, and shall identify himself before the person to whom the proceeding for collection of payment and seizure of property shall be performed, with negotiation, as applicable (art. 152, CFF).
EP.- Permanent establishment.
CFDI.- Invoice (Comprobante Fiscal Digital por Internet).
CFF.- Federal Fiscal Code (Código Fiscal de la Federación).
ISR.- Income Tax (Impuesto Sobre la Renta).
LIEPS.- Law of the Special Tax on Production and Services (Ley del Impuesto Especial Sobre Producción y Servicios).
LIF.- Federal Income Law (Ley de Ingresos de la Federación).
LISR.- Income Tax Law (Ley del Impuesto Sobre la Renta).
LIVA.- Value Added Tax Law (Ley del Impuesto al Valor Agregado).
REFIPRE.- Preferential Tax Regime (Régimen Fiscal Preferente).
RFC.- Federal Taxpayers Registry (Registro Federal de Contribuyentes).
SAT.- Tax Administration Service (Servicio de Administración Tributaria).
VAT.- Value Added Tax (Impuesto al Valor Agregado).
This is a preliminary analysis for informational purposes only and it is not a legal opinion. The opinions and considerations set forth herein may vary from the opinion or criteria of any governmental authority, court, and/or third party..
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