Tax litigation in Mexico: overview

Publicada en Publicada en English, Tax
A Q&A guide to civil and criminal tax litigation in Mexico.
This Q&A provides a high level overview of the key practical issues in civil and criminal tax litigation, including: pre-court/pre-tribunal process, trial process, documentary evidence, witness evidence, expert evidence, closing the case in civil and criminal trials, decision, judgment or order, costs, appeals, and recent developments and proposals for reform.
To compare answers across multiple jurisdictions, visit the Tax Litigation: Country Q&A tool.
The Q&A is part of the global guide to tax litigation. For a full list of jurisdictional Q&As visit www.practicallaw.com/taxlitigation-guide.

Overview of tax litigation

 

Issues subject to tax litigation

 

1. What are the most common issues subject to tax litigation in your jurisdiction?
The tax court system provides a forum where taxpayers can challenge the legality of administrative resolutions issued by the tax authorities through tax litigation. The most common issues subject to tax litigation initiated by taxpayers are based on the following grounds:
  • The administrative resolution or law violates the Mexican Constitution.
  • The tax authority that issued the administrative resolution or law had no legal basis for issuing it.
  • Incorrect interpretation or application of tax provisions.
  • Missing the exhibition of all the proper evidence during the audit process to challenge the tax authorities’ conclusions.
  • Rejection of the methodology, comparable companies and adjustments used by taxpayers for the transfer pricing analysis.
A new ruling issued by Mexico’s Supreme Court provides that if a taxpayer fails to submit in a timely manner the information and documentation requested by the tax authorities during an audit, the taxpayer cannot then later file that information and documentation as evidence in a subsequent court action for annulment.
A taxpayer can either file a complaint in writing to the Federal Tax Court, or submit an online application through the Online Justice System.

 

Legislative framework

 

2. Outline the legislative framework and principal pieces of legislation governing both civil and criminal tax litigation.

Civil tax litigation

Mexico follows a Civil Code system. In Mexico, like other countries which are influenced by the European judicial system (that is, the Roman system), the judicial process is based on the existing laws and court precedents issued by judges.
The power to impose taxes in Mexico rests primarily with the federal government. The Constitution grants exclusive powers to the Congress to levy taxes on the following matters:
  • Domestic and foreign trade.
  • The development and exploitation of natural resources.
  • All commercial and industrial activities, including those of financial institutions and insurance companies.
  • Certain public services.
  • Several products (such as tobacco, petroleum, and products derived from petroleum).
The states also have tax levying powers but they are restricted by the Constitution from levying taxes in areas exclusively reserved for the Congress.
There are many tax agreements entered between the states and the Congress for avoiding double taxation at both federal and state level. Under those agreements, tax revenues collected by the federal government are allocated and transferred to the states in cases where their powers to levy taxes have been limited.
The most important laws and regulations governing the Mexican tax system are as follows:
  • Constitution.
  • Federal Fiscal Code (FFC) and its Regulations.
  • Income Tax Law (ITL) and its Regulations.
  • Value Added Tax Law (VATL) and its Regulations.
  • Special Production and Services Tax Law (SPSTL).
  • Federal Taxpayers’ Rights Law.
  • Omnibus Tax Regulations.
  • Tax authority standards (non-binding tax criteria) and jurisprudence.
In addition, Mexico has entered several Conventions for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with other jurisdictions with respect to taxes on income.
Finally, the executive power submits a Tax Reform Bill to Congress for each year with proposed amendments to the major federal taxes. Those amendments are usually enacted into law and become effective on 1 January of the following year.

Criminal tax litigation

In July 2016, Mexico adopted a new oral adversarial criminal justice system which is governed by the National Criminal Proceedings Code (NCPC).

 

Tax evasion and other criminal tax offences

 

3. What are the key elements that constitute tax evasion and other main criminal tax offences in your jurisdiction?
In general, the main tax offences in Mexico consist of the following (among others):
  • Smuggling.
  • Tax fraud.
  • Crimes concerning the Federal Tax Registry.
  • Crimes concerning tax accounting records.
  • Non-disclosure, alteration or destruction of accounting systems and records.
  • Claiming false tax losses.
  • Omitting information from Informative Declarations.
  • Disclosure and illegal use of confidential information.
  • Crimes concerning official seals and marks.
  • Illegal tag possession.
Liability for committing criminal tax offences will arise where a party does any of the following acts:
  • Plan an offence.
  • Engage in the conduct or commit the act described in the law.
  • Jointly commit an offence.
  • Use another person as an instrument to commit an offence.
  • Deceive another person and encourage him to commit an offence.
  • Intentionally help another person to commit an offence.
  • Assist another person after the offence has been committed, in fulfilment of a prior commitment.
  • Act as guarantor as a result of a legal provision, a contract or the byelaws, in crimes of omission which have material consequences (as a result of the overriding legal obligation that exists to prevent the crime).
  • As a result of a contract or agreement that implies the development of an independent activity, propose, determine or carry out by themselves (or through an intermediary) acts, operations or practices, the implementation of which directly results in the commission of a tax crime.
Mexico makes a distinction between tax evasion (which is not regulated under the Federal Fiscal Code (FFC)) and tax fraud (which is a criminal offence under the FFC).
The offence of tax fraud is the main offence that is committed. It consists of either resorting to deceit, or taking advantage of mistakes, to avoid paying all or part of a tax contribution, or to obtain an undue benefit, to the detriment of the federal tax authorities.
The offence of tax fraud will be aggravated when it arises as a result of:
  • The use of forged documents.
  • The repeated failure to issue supporting documentation (invoices) for the activities conducted (if the tax provisions require that such documentation be issued).
  • The submission of false data to obtain an undue refund of contributions from the tax authorities.
  • A failure to maintain accounting records or systems required by the tax provisions, or recording false data in those records or systems.
  • Failure to pay withheld, collected or charged contributions.
  • The provision of false data to improperly offset contributions.
  • The use of false data to credit or reduce contributions.

 

Pre-court/pre-tribunal process

 

Assessment, re-assessments and administrative determinations in civil law

 

4. Outline the procedure for tax assessments, re-assessments and administrative determinations in civil law.
The Mexican Tax Authority (Servicio de Administración Tributaria) (SAT) (www.sat.gob.mx/Paginas/Inicio.aspx) is the main tax authority.
Mexico has a self-reporting tax system. Mexican taxpayers must file several tax returns during each year (for example, income tax and value added tax returns). Taxpayers must comply with several different tax obligations.
Therefore, to ensure that taxpayers (and parties jointly and severally liable with them, including third parties related to them) have complied with the relevant tax provisions, the tax authority has the power to conduct an audit of any taxpayer.
Whilst conducting an audit of a taxpayer, if the tax authorities become aware of acts or omissions which imply a failure to comply with the tax provisions, they will assess the unpaid contributions, surcharges and penalties in a ruling. A personal notification of that ruling must be given to the taxpayer within a six-month period following the date on which the audit was concluded. The tax liability of a taxpayer for a given tax year is determined based on the tax laws in effect during that year.
Under the tax provisions, the tax authority can modify tax profits or losses by using presumptions to estimate the price for which taxpayers purchased or sold assets, as well as the consideration amount involved in any transaction (other than sales).
Taxpayers have the right to file an administrative appeal against the review conducted by the tax authority prior to commencing formal litigation (see Question 5).

 

Resolving disputes before commencing court proceedings

 

5. What are the main procedures used to resolve disputes before commencing proceedings in a civil court/tribunal?

Administrative appeal

Taxpayers have 30 business days to file an administrative appeal with the tax authority against the ruling issued by the tax authority to resolve the dispute prior to formal litigation (the time limit runs from the day on which the taxpayer receives the notification of the ruling from the tax authority). It is not mandatory to file an administrative appeal with the tax authority before bringing an action in the Federal Tax Court, and this course of action is entirely at the taxpayer’s discretion. However, the benefit of this appeal procedure is twofold:
  • Taxpayers are not obliged to guarantee the payment of the tax assessment until the administrative appeal ruling is issued and served.
  • Taxpayers can submit evidence which was not initially submitted to the tax authority during the audit.
If the tax authority fails to issue a ruling on the administrative appeal, and notify the taxpayer of that ruling, within three months following the date on which the appeal was filed, the silence of the tax authority can be taken as confirmation of the tax assessment. Provided the tax authority does not expressly dismiss the administrative appeal, the taxpayer can file a nullity claim with the Federal Tax Court.
Once the tax authority has issued a ruling on the appeal and notified the taxpayer of that ruling, the taxpayer has 45 business days to file a claim to nullify that appeal ruling with the Federal Tax Court. The taxpayer, upon filing a nullity claim with the Federal Tax Court, then has ten business days to guarantee the payment of the tax liability assessed in the appeal ruling.

Settlements

A new settlement procedure was introduced in 2014, so that taxpayers who have been subject to a tax audit by the tax authority can elect to agree to a settlement. Where a taxpayer disagrees with the facts or omissions described in the last preliminary audit report, the final audit report or the provisional ruling, and believes the audit report or ruling constitutes a breach or misinterpretation of the tax provisions, the taxpayer can request that the tax authority adopt a settlement. The settlement is agreed by considering the fact(s) or omission(s) that the taxpayer disputes.
Taxpayers must submit a written application for a settlement with the Taxpayer Advocate Office. The written application must:
  • Describe the fact(s) or omission(s) with which the taxpayer disagrees.
  • Describe what qualifications the taxpayer believes should be attributed to those fact(s) or omission(s).
Any documentation deemed necessary can be enclosed with the application.
Once an application is received, the Taxpayer Advocate Office will request that the tax authority declare, within 20 days from the day on which the tax authority receives the request:
  • Whether it accepts the terms of the settlement or not.
  • The factual and legal grounds for not accepting the settlement, or the terms under which the settlement will be adopted.
Once the Taxpayer Advocate Office acknowledges receipt of a tax authority’s answer, it will have a 20-day period within which to conclude the procedure. Whenever the procedure concludes with the execution of a settlement, it must be signed by the taxpayer and the tax authority, as well as by the Taxpayer Advocate Office.
In order to promote the adoption of settlements, the Taxpayer Advocate Office can organise round work tables, encouraging at all times that the tax authority and the taxpayer agree to the execution of a settlement.
Taxpayers who have executed a settlement will be entitled, on a single occasion, to a 100% remission of penalties. In cases of second or subsequent executions of settlements, the rules regarding the remission of penalties under the Federal Taxpayers’ Rights Law will apply.

 

Elements of the offence in criminal law

 

6. What are the elements of the main criminal law offences in tax litigation?
The main criminal law offences subject to tax litigation are:
  • Tax fraud.
  • Smuggling.
The elements of the criminal offence of tax fraud are that a taxpayer intentionally deceives the tax authority to either:
  • Avoid full or partial payment of any tax contribution.
  • Obtain an undue benefit to the detriment of the federal treasury.
Every defence against tax fraud is different, but generally the taxpayer must prove the following:
  • The failure to pay was not intentional.
  • The behaviour did not cause any injury to the federal treasury.
  • The expert opinion concerning the accounting that the tax authority has relied on to determine the existence of a credit or the lack of payment of a contribution is discredited.
The elements of the criminal offence of smuggling consist of importing goods into Mexico, or exporting goods from Mexico, and either:
  • Omitting the total or partial payment of a tax contribution which was due.
  • Failing to obtain the required permission of a competent authority to import or export the goods.
  • Knowing that those goods being imported or exported have been prohibited from import or export.
The general defences against an indictment for the offence of smuggling are as follows:
  • Proof of the legal import of the goods.
  • Proof of payment that the corresponding contributions were made in order to legally import the product.
  • Proof that the imported goods are legally allowed.

 

Early resolution

 

7. What are the main procedures used for the early resolution of criminal law offences before trial?
The National Criminal Proceedings Code (NCPC) provides the following alternative dispute resolution solutions for the early resolution of criminal proceedings:
  • Compensation agreements.
  • Conditional suspension of the process.
  • Summary procedure.
  • Plea bargaining.

Compensation agreements

These are agreements between the victim and the accused which aim to settle the dispute between them that originated the criminal proceedings. Such agreements must be approved by the Public Prosecutor or by the judge, depending on the procedural stage at which they are granted, and can be agreed at any stage of the proceedings (even before the decision to open the trial procedure is reached).
This alternative solution can be used for the following offences:
  • Smuggling.
  • Tax fraud.
  • Crimes committed against the Federal Register of Taxpayers.
  • Printing or producing illegal reproductions of tax receipts.

Conditional suspension of the process

This can be formulated by the Public Prosecutor or the accused, and it consists of providing a detailed report on the payment of compensation for the damage caused, and creating conditions that guarantee the rights of the victim. Where a conditional suspension of the process is agreed, this extinguishes the right to proceed against the accused in a criminal proceeding.
The judge will set a time limit which applies to a conditional suspension of the proceedings, which cannot be less than six months or more than three years. The judge will also authorise the programme to repair the damage caused by the accused, and the accused can have one or more conditions imposed upon him to ensure that the damage is fully compensated.
Conditional suspension of the process can be used for the following offences:
  • Tax fraud.
  • Smuggling.
  • Crimes committed against the Federal Register of Taxpayers.
  • Printing or producing illegal reproductions of tax receipts.

Summary procedure

This is a special procedure which is used to speed up the criminal proceedings. In this procedure, the defendant waives his right to trial and admits responsibility for the crime to obtain benefits in sentencing and save financial resources and time. The defendant is charged and agrees to be sentenced with the evidence presented by the Public Prosecutor.
Unlike plea bargaining (see below), the summary procedure does not imply an admission of guilt, only an admission of responsibility for the crime.
The accused benefits from a minimum reduction of one-third of the minimum sentence for the alleged offence, which can be further reduced to up to one-half of the minimum sentence for the alleged offence, depending on the legal classification of the offence and the facts of the case.
The summary procedure is carried out in open court before a judge, where the Public Prosecutor must be present along with the accused. The presence of the victim or his legal adviser is not required unless there is justified opposition to carrying out the summary procedure.
At the hearing, the judge ensures that the legal requirements are met, and that there is evidence to substantiate the allegation made by the Public Prosecutor. The judge listens to the arguments of the parties and finally provides a judgment, explaining the rationale and reasons taken into consideration.
In summary proceedings the judge protects the rights of the accused in the sense that prior to the issuing of a judgment, he ensures both that:
  • There are sufficient elements for conviction.
  • The accused understands that he is waiving is right to trial.
There have been cases in which the courts have ordered the acquittal of the accused to protect the accused’s rights, because their acceptance of responsibility is completely contradictory to the existing evidence.

Plea bargaining

Plea bargaining is a negotiation conducted between the prosecution and the defence of the accused to obtain a confession of guilt in exchange for benefits (such as reduced fees or penalties).

 

Trial process

 

Format of the hearing/trial

 

8. What format does the hearing/trial take?
Taxpayers can challenge administrative resolutions issued by the tax authority by filing a nullity claim with the Federal Tax Court. A nullity claim can be brought on the following grounds:
  • The administrative resolution violates the Mexican Constitution.
  • The administrative resolution breaches legal provisions.
As a rule, there are no oral submissions and the hearing is conducted using written submissions. However, where a case proceeds to the Supreme Chamber of the Federal Tax Court, the matters are discussed by the judges in a public hearing (in which the parties to the trial can be present but cannot participate).
From a criminal perspective, first instance hearings are public, continuous and conducted orally with the continued presence of the judge, the public prosecutor, the accused and the defence counsel.
The judge or court must witness the depositions of the witnesses, the experts, and the questioning and cross-examinations conducted by the parties. The judge must hear the parties’ arguments and issue its determination or ruling orally at the same hearing (without prejudice to the judge, who also prepares a written determination).
Second instance hearings (appeals) are conducted with the members of the Appeal Court, who hear the parties’ arguments, debate the issues and issue a ruling at the same hearing.
In both first and second instance hearings, the court has an obligation to orally explain to the parties the reasons and rationale that led the court to issue its ruling.

 

Role of the judge/arbitrator/tribunal members

 

9. What is the role of the judge/arbitrator/tribunal members in both civil and criminal tax litigation?

Civil tax litigation

The role of the Federal Tax Court is to:
  • Conduct the process.
  • Analyse the evidence and the arguments of the parties.
  • Interrogate the witnesses and expert witness.
  • Issue a judgment determining if the challenged administrative resolution is legal or not.
  • Enforce the judgement of the trial.

Criminal tax litigation

In the adversarial system, there are three types of judges during criminal tax litigation:
  • Control judge.
  • Court trial judges.
  • Enforcement judge.
Control judge. His main function is to protect the fundamental rights and procedural rights of the parties during the investigation phase. The control judge’s jurisdiction begins with the investigation stage and concludes with the issuance of the order to commence trial. The control judge has the following responsibilities:
  • Rules on matters which affect the accused’s fundamental rights (such as arrests, raids, seizures, interception of communications, and so on).
  • Decides on the imposition, or lifting, of precautionary measures imposed on the accused.
  • Presides over the investigation stage, from the initial formulation of the complaint to resolving whether or not the matter should proceed to trial, fairly assessing the evidence submitted by the parties to resolve the legal status of the accused.
  • Rules on requests that lead to an early termination of the criminal proceedings.
  • Rules on the qualification and legality of the evidence that will be presented in the trial and decides on its admissibility.
Court trial judges. These judges have the role of presiding over the trial hearing and issuing the ruling. There is a collegiate court comprising three judges who have no involvement in the previous stages of the procedure, so that their judgment is made based on the information and evidence submitted during the trial. The judges’ main function is to hear the evidence and adjudicate in one instance on the guilt or innocence of the accused.
Enforcement judge. This judge’s jurisdiction begins once a final conviction is issued, to ensure the effective compliance with the judgment issued by the court trial judges. The enforcement judge can also resolve any matters concerning modifications to the accused’s sentence.

 

Commencement of proceedings: civil law

 

10. What is the procedure for commencing tax litigation proceedings in civil law and/or a taxpayer appealing a decision of the tax authority?
The taxpayer must file a nullity claim with the Federal Tax Court within 45 business days following either:
  • The date on which the taxpayer receives the notice of the tax deficiency from the tax authority (where the taxpayer does not opt to make use of the administrative appeal procedure (see Question 5, Administrative appeal)).
  • The date the taxpayer is notified of the ruling of the administrative appeal (where the taxpayer uses the administrative appeal procedure).
The taxpayer, upon filing a nullity claim with the Federal Tax Court, then has ten business days to guarantee the payment of the tax liability assessed in the appeal ruling.
The taxpayer must attach the following items to the nullity claim:
  • The document containing the challenged administrative resolution and its notification.
  • The questionnaire which must be answered by the expert(s), which must be signed by the taxpayer.
  • The questionnaire for the witnesses.
  • The documentary evidence submitted.

 

11. Must a taxpayer pay the disputed tax before leave to appeal the tax authority’s decision is granted?
The tax liability must be guaranteed or paid (see Question 10). If not, the tax authorities will execute the administrative resolution by collecting the unpaid taxes, surcharges and penalties. If the payment is not proven or made, the tax authority will seize enough goods to guarantee the payment of the tax.

 

Commencement of proceedings: criminal law

 

12. What is the procedure for commencing tax litigation proceedings in criminal law?
Under the Federal Fiscal Code (FFC), certain crimes are investigated and prosecuted by a petition of the Ministry of Treasury and Public Credit (mainly some smuggling cases and tax fraud), and others are prosecuted ex-officio.
In a criminal complaint, the Ministry of Treasury and Public Credit must explain all the facts of the case and include the amount of the pecuniary damage suffered by the government.
The criminal complaint is filed before the Federal Attorney General Office, which has a Special Investigation Unit of Tax Crimes.
The Public Prosecutor in charge of the investigation must obtain all evidence to prove that both:
  • The accused acted in a way that corresponds to all the elements of the offence as detailed in the relevant law.
  • The accused committed or participated in the crime.
Prison sentences for tax offences are determined by taking into account the amount of the unpaid taxes, considering the period of time involved when the offence was committed.

 

Government response

 

13. How has the government responded to recent civil and criminal law cases to improve the court procedure?

Civil law

See Question 36.

Criminal law

The government regularly evaluates how the new criminal justice system operates to locate issues, areas of improvement or legal loopholes.

 

Burden of proof

 

14. What is the burden of proof in both civil and criminal tax litigation proceedings?

Civil law

The burden of proof falls on the taxpayer in civil tax litigation, since there is an automatic presumption that administrative acts are legal in Mexico. In general, the taxpayer must prove his case “on a balance of probabilities”.
However, the tax authority must prove the facts where the taxpayer plainly denies them (unless that denial involves the affirmation of another fact asserted by the tax authority).

Criminal law

The burden of proof in criminal matters falls on the Public Prosecutor. The presumption of the accused’s innocence is one of the main principles of criminal law, so the Public Prosecutor must fully prove that the accused committed the crime.
The standard of proof presented by the Public Prosecutor increases at every stage of the criminal process, reaching its highest in the trial hearing.
For example, in the investigation phase, the Public Prosecutor can request an indictment only by proving that there is an offence and that there is a possibility that the taxpayer committed that offence.
In the trial hearing, guilt must be proven “beyond reasonable doubt” for the taxpayer to be found guilty.
If in doubt, the court must acquit.

 

Main stages

 

15. What are the main stages of typical court proceedings for tax disputes?

Civil law

In general terms, the basic steps in tax litigation are as follows:
  • Filing of the nullity claim.
  • Service of the summons.
  • Filing an answer to the complaint (this must occur within 45 business days of the service of the summons).
  • Submission and consideration of experts’ opinions (this usually takes between seven and 11 months).
  • Submission and consideration of closing arguments (this usually takes between six to 12 months).
  • Delivery of tax court judgment.
  • Filing for constitutional proceedings (juicio de amparo) and/or review (this must occur within 15 business days of the delivery of the tax court judgment).
  • Circuit Court judgment (this usually takes between six to eight months after constitutional proceedings/review has been filed).
  • Filing for review to challenge constitutionality of the law (this must occur within ten business days from the Circuit Court judgment).
  • Supreme Court judgment (this usually takes between five to seven months after filing for review of the constitutionality of the law).
The entire process may take around 45 months, but generally it takes around 20 months.

Criminal law

The main stages of typical court proceedings in criminal cases are as follows:
  • Investigation, which includes the following two stages:
    • initial investigation (begins with the filing of the complaint and ends when the accused is presented to the control judge);
    • complementary research.
  • The intermediate or trial preparation, which involves the formulation of the accusation and runs until the ruling that sets a date for trial.
  • The trial, which runs from the date the trial opens through to the duration of the trial and the ruling issued by the enforcement judge.

 

Documentary evidence

 

Disclosure of documents in civil proceedings

 

16. What documents must the parties disclose to the other parties and/or the court in civil proceedings? Are there any detailed rules governing this procedure?
The parties must submit to the tax authority (during an audit or administrative appeal) or to the court (during the commencement of court litigation):
  • Their claim (or their answer to the claim).
  • All documents that will be used as evidence.
Copies of the above documents must also be submitted to the tax authority or the court, so that these can be circulated to each party’s counterparty.

 

Special rules/considerations

 

17. Are there any special rules or considerations concerning the disclosure or discovery of documents in civil tax litigation?
Where the required documents (see Question 16) have not been submitted to the tax authority (during the audit or administrative appeal) or the court (during the commencement of court litigation), the tax authority/court will not admit them.

 

Disclosure in criminal proceedings

 

18. What documents must the parties disclose to the other parties and/or the court in criminal proceedings? Are there any detailed rules governing this procedure?
Once the preliminary investigation has commenced and there is a direct charge against the accused, the victim, and the accused and his counsel, can review the investigation and ask the Public Persecutor to present all the evidence that has been collected during the investigation.
At the first stage of the investigation, the records and all documents, regardless of their content or nature, objects, including voice recordings and images or related items, are strictly reserved. The accused and his counsel can have access to them when they are detained, or summoned to appear in front of the Public Prosecutor for an interview. From this point on the investigation cannot be held in secret, to ensure that the right of the accused to present a defence is not affected.
Once a ruling has been issued to continue the process, there are no circumstances under which the records from the investigation can be reserved.
Once summoned to the initial hearing, the accused and his counsel have the right to consult the records of the investigation and must be given the proper opportunity to prepare a defence. If the Public Prosecutor refuses to allow access to the records or does not allow access to copies, the accused and his counsel can appeal to the control judge.

 

Special rules/considerations

 

19. Are there any special rules or considerations concerning the disclosure of documents in criminal tax litigation?
Exceptionally, the Public Prosecutor can ask the control judge to ensure that certain information is kept private even after the issuance of the order to commence trial, to either:
  • Prevent the destruction, alteration or concealment of evidence.
  • Prevent intimidation, threat or influence on the witnesses.
The information can only be kept private in order to:
  • Ensure the success of the investigation.
  • Ensure the protection of persons or property.

Witness evidence

Trial considerations

 

20. Do witnesses of fact give oral evidence or do they just submit written evidence? Is there a right to cross-examine witnesses of fact?

Civil law

In civil tax litigation it is not common to use witness as evidence, as the evidence is generally presented in written form using documents and any expert opinion. However, if witnesses are used, an oral hearing takes place where the parties and the judge question the witness on issues of fact that are relevant to the litigation.

Criminal law

At the trial hearing, witnesses must orally testify in the presence of the court, the defendant’s counsel, the victim and his counsel. The judge cannot examine the witness. The witness can be examined by the party who offers their testimony and cross-examined by the opposing party.

 

Witness preparation

 

21. Provide a brief outline of the procedure for preparing witnesses in both civil and criminal cases. Are there any special or unique features to consider for witness evidence in criminal cases?

Civil law

Questionnaires must be presented in written form attached to the nullity claim. Witnesses cannot be instructed by either party.

Criminal law

Witnesses can be prepared, and the preparation of witnesses under the principle of loyalty is key to obtaining a successful outcome in a criminal trial, particularly in the case of tax or financial crimes that require highly technical knowledge.
However, witnesses cannot be instructed, since this is synonymous with corruption and disloyalty and is forbidden by democratic justice systems.

 

Hearsay evidence in civil and criminal trials

 

22. Are there any rules concerning the introduction of hearsay evidence in civil and criminal trials?

Civil trials

The court will not admit hearsay evidence.

Criminal trials

The testimony from a witness who has knowledge of an event but did not experience it first-hand has no value by itself. However, it can acquire value when it is substantiated by other evidence, which when taken together collectively proves a legal truth.

 

Expert evidence

Expert reports in civil trials

 

23. What are the rules concerning the introduction of expert reports in civil trials?
All expert evidence must be submitted though a written report, and in order to be introduced it must comply with the following rules:
  • The parties wishing to introduce expert evidence must present their experts, within a period of ten business days from the commencement of proceedings, so that:
    • it can be established that the expert meets the necessary requirements to present evidence;
    • the expert can accept his duty to provide evidence and swear an oath to lawfully provide that evidence.
  • Where the judge is able to do so, he will state the location, date and time to examine the expert evidence. The judge can also request clarifications from the expert, where necessary, and request that the expert conduct further activities.
  • Once an expert has been accepted to provide evidence, the judge will provide the expert with a minimum term of 15 business days within which to provide that evidence.

 

Expert evidence in civil trials

 

24. What are the rules concerning the introduction of expert evidence in civil trials?
All expert evidence is submitted through a written report (see Question 23).

Expert evidence in criminal trials

 

25. What are the rules concerning the introduction of expert evidence in criminal trials? Is it possible to introduce expert reports?

Expert evidence

Any expert evidence can be submitted by the parties, from the beginning of the investigation until the trial hearing.

Expert reports

Expert reports must be presented in writing during the investigation, but at the trial hearing the reports must be presented orally by the experts, by answering questions that are formulated by the prosecution and/or the defence. The experts can use slides, projectors, or any means that allows them to explain their evidence in the best detail.

 

Special considerations

 

26. Are there any special considerations for introducing expert evidence/reports in both civil and criminal trials?

Civil trials

If the reports of the experts appointed by the parties are not consistent, a third-party expert will be designated by the Federal Tax Court from among those ascribed to it. In the court order designating a third-party expert, a minimum term of 15 days will be granted to the expert to issue his opinion.

Criminal trials

In the case of expert evidence, only the expert that was tasked with creating the expert report can introduce that report to the trial. The expert witness cannot read the report out in court, but can explain its opinion to the court through open questions that are asked by the defence or the prosecution. The expert can use both audio and visual equipment, or any other means that allow the evidence to be better understood.

 

Closing the case in civil trials

 

27. What are the rules governing the submission of both written and oral argument in closing a civil trial?
Ten days after the civil trial has been completed, the judge hearing the trial must notify the parties that they have a period of five days within which to make their closing arguments (these must be made in writing). The arguments filed in due time must be taken into consideration in the judgment.
Closing arguments are the last step before the trial is declared closed, so the taxpayer should keep in mind that this (together with the evidence duly exhibited during the trial) is the last opportunity to make an impression on the judge concerning their legal position.

 

Closing the case in criminal trials

 

28. What are the rules governing the submission of both written and oral argument in closing a criminal trial?
Closing arguments in a criminal trial must be submitted orally.

 

Decision, judgment or order

 

Civil law cases

 

29. What are the rules governing the issuance of a decision in civil cases?
Judgment must be delivered by a unanimous or majority vote of the judges that comprise the Chamber of the Federal Tax Court (three judges). For this purpose, the judge in charge of the proceeding must prepare a written draft of the judgment within 45 days of the date that proceedings close.
When a majority of the judges are in agreement with the draft, the dissenting judge can simply state that he votes in whole or in part against the draft, or issue a reasoned dissenting vote, which must be submitted within a period not exceeding ten days of the date the draft is prepared.
If the draft is not accepted by the other judges, the judge in charge of the proceeding must draft the judgment with the arguments of the majority (the original draft can remain on file to show how each judge voted on the matter).
Court judgments must comply with the law and rule on the claim as presented by the claimant with respect to the challenged administrative resolution, taking into account all the evident facts.
The Federal Tax Court can correct any errors that may appear in the parties’ arguments which concern the relevant sections/Articles of law being misquoted. The court must examine the arguments presented by the taxpayer concerning the illegality of the administrative resolution, and any other reasoning, to resolve the dispute. However, the court must not alter the facts when considering the complaint and making a judgment.
In the case of judgments where the tax authority is ordered to re-establish a breached right or to refund any amount, the court must verify both:
  • The previous right of the taxpayer.
  • The illegality of the challenged administrative resolution.

 

Criminal law cases

 

30. What are the rules governing the issuance of a decision in criminal cases?
Immediately once the closing arguments have been presented and the trial is concluded, the trial court must order a recess to deliberate in private, in an isolated and continuous way, to issue the decision. The deliberation must not exceed 24 hours or be suspended (except in cases of serious illness of a judge).
The ruling must indicate:
  • The decision (acquittal or conviction).
  • If the decision was taken unanimously or by a majority of the members of the court.
  • A statement of the grounds for, and the reasons that underlie, the ruling.
Upon conviction, at the same hearing a date will be set for the court to determine sanctions and reparations (the sentencing date must be within a period of five days from the date of the hearing).

 

Costs

 

31. How is the issue of costs determined in both civil and criminal cases?

Civil law

In proceedings heard by the Federal Tax Court no order to pay attorney’s fees is usually issued. Each party is liable for its own expenses and those derived from any action they file or request. However, there are two exceptions to this general rule:
  • An order to pay costs will be made in favour of the defendant tax authority when administrative resolutions have been challenged evidently for delaying purposes.
  • The defendant tax authority must indemnify the taxpayer affected by the sum of accrued damages and losses when the administrative unit of that body commits a serious fault by litigating on the challenged administrative resolution and failing to accept the claim when answering the complaint in the applicable challenging argument. There will be a serious fault when there has been:
    • lack of ground or cause; or
    • contravention of the jurisprudence of the Mexican Supreme Court of Justice; or
    • misuse of authority.

Criminal law

There are no costs awarded under the legal provisions governing criminal litigation in Mexico.

 

Appeals

 

Right to appeal in civil law

 

32. What are the main grounds for appealing a civil law decision?
Final judgments issued by the Federal Tax Court can be challenged by the taxpayers and the tax authority. Taxpayers can challenge the judgment on a direct amparo (constitutional proceedings) or matters concerning legality, which will be finally decided by a Federal Circuit Court. The tax authority can challenge the judgment through a motion for review.

 

Procedure to appeal in civil law

 

33. What is the procedure for appealing a civil law decision?
The procedure for appealing a civil law decision is as follows:
  • The deadline to submit the claim for the direct amparo (within 15 days from the judgment).
  • The Federal Circuit Court’s President will resolve whether it will allow the appeal, consider that the complainant cannot appeal, or reject the appeal on the grounds that there is a clear and undeniable reason for its inadmissibility (within three days from the appeal being submitted).
  • If there are irregularities in the statement of claim, the President will note these and allow them to be corrected (within five days from allowing the appeal). If they are not corrected within the next three days, the appeal is considered not filed.
  • The President will submit the case to the judge in charge in order to formulate the draft judgment (within 90 days from either the appeal being allowed, or the statement of claim being corrected).
  • The judge rapporteur formulates the draft judgment (within three days before the session commences).
  • A date is set for the session, where the President will discuss every issue of the draft judgment, debate the issues and proceed to vote on the judgment.
  • Judgment is made by a unanimity or majority vote. In the latter case, a judge who does not agree with the judgment must provide an individual opinion succinctly expressing his reasons for dissenting (within ten days following the signing of the judgment).

 

Right to appeal in criminal law

 

34. What are the main grounds for appealing a criminal law decision?
The main ground for appealing a criminal law decision is that there has been a serious violation of due process. The purpose of a criminal appeal is to examine that the judgment was reached on the basis of due process without any violations to either:
  • The rights of the parties.
  • Human rights law.

 

Procedure to appeal in criminal law

 

35. What is the procedure for appealing a criminal law decision?
An appeal against the decision of a control judge must be filed in writing with that control judge:
  • Within three days from the day on which notification takes place (if the appeal is against a particular decision or providence).
  • Within five days (in the case of a definitive ruling).
The court will send the relevant documents to the Court of Appeal that will hear the case. Once the appeal opens, the appellant is given the floor to present his arguments on the grievances expressed in writing, but cannot introduce new concepts or new grievances. The ruling of the Court of Appeal will either confirm, amend or repeal the contested decision, or order the reinstatement of the contested decision.

 

Recent civil law developments and proposals for reform

 

36. Outline the main recent civil law developments in tax litigation in your jurisdiction. Are there any proposals to reform civil law tax litigation?
Recent tax provisions were added to the Federal Law of Procedure of Administrative Litigation (FLPAL). Provisions were added to the FLPAL on 27 January 2017 to set out a new trial model to resolve legality disputes of substantive matters resolutions only (that is, if the taxpayer has a monetary liability). These provisions will come into effect one business day after the Regional Chamber starts operating on 30 June 2017.
Under these amendments, the trial model trial will be as follows:
  • The taxpayer no longer has an obligation to guarantee the fiscal interest (tax assessment) until the resolution that ends the trial is issued.
  • The dispute revolves around the legality of resolutions concerning the :
    • subject and object of the tax;
    • tax base; and
    • tax rates or fees.
  • The amount of the litigation must be greater than 200 times the annual Unit of Measure and Update (unidad de medida y actualización) (that is, the amount must be greater than MXN5,507,760).
  • A trial is not possible if an administrative appeal has been filed against the resolutions, and this appeal has been rejected, dismissed or not filed.
  • The taxpayer can only argue contested items that are aimed at exclusively resolving on the substance of the dispute that arises. This means that arguments in relation to formalities, such as the due process of the audit, will not be accepted.
  • The claim must expressly state that the taxpayer is opting for the exclusively substantive final judgment. The taxpayer cannot change its choice later.
  • The taxpayer must also include a brief and specific summary of the substantive dispute. This must indicate the purpose of the litigation, the origin of the dispute, where it arises from and so on.
  • The admissibility of the exclusively substantive final judgment depends on whether the contested items (set out in the claim) include arguments that deal with the merit of the dispute.
  • Within 20 days from receiving aresponse to the complaint the Investigating Judge summons the parties for an oral hearing to set the litigation. Parties can either attend personally or send their authorised attorneys.
  • The parties can request a private hearing with the Investigating Judge or with any Judge in the Specialist Chamber, but only if it is held in the presence of the opposing party. If both parties have been duly notified and one party does not attend the private hearing, the private hearing proceeds only with the present party.
  • For evidence to be admissible, it must be offered and exhibited in the:
    • verification procedure from which the contested act arises;
    • procedure for Conclusive Agreements regulated in the Federal Tax Code; or
    • the corresponding administrative appeal.
  • Expert evidence is presented by exhibiting the expert’s report. It must be attached to either the claim, supplemented claim or response.
  • The experts’ reports are assessed by the Investigating Judge during the hearing and should only deal with the technical grounds within the experts’ area of expertise.
  • The final judgment may recognise the validity or declare the invalidity of the contested resolution. An exception to this are cases where the judgment amends the amount, scope and terms of the contested administrative resolution, or the sanction.
  • If it is not in its favour, the defendant can file for judicial review against an exclusively substantive final judgment.

 

Recent criminal law developments and proposals for reform

 

37. Outline the main recent criminal law developments in tax litigation in your jurisdiction. Are there any proposals to reform criminal law tax litigation?
Amendments are currently before Congress to reform the National Criminal Proceedings Code. This is mainly to improve the process to obtain evidence in the investigation stage.

 

Online resources

 

Mexican House of Representatives (Cámara de diputados)

Description. Official website of the Mexican House of Representatives, containing legislation.

 

Mexican Supreme Court (Supera Corte de Justicia de la Nación)

W www.scjn.gob.mx
Description. Official website of the Mexican Supreme Court, containing case law and legislation.

 

Federal Tax Court (Tribunal Federal de Justicia Fiscal y Administrativa)

Description. Official website of the Federal Tax Court, containing case law.

Contributor profiles

 

Gil Zenteno Garcia, Partner

Basham, Ringe & Correa, SC

T +52 55 52 61 05 22
F +52 55 52 61 04 96
E zenteno@basham.com.mx
W www.basham.com.mx/en/
Professional qualifications. Graduated with honours from the Law School, La Salle University. Completed Graduate programmes in Tax Law, Commercial and Administrative Law at the Universidad Panamericana. Participated in the “Program of Instruction for Lawyers” at the School of Law, Harvard University.
Areas of practice. Tax; consulting and litigation; administrative law; customs.
Recent transactions.
  • Partner of the firm since 2003 in the tax practice area of the Mexico office, his practice includes consulting and tax planning, tax audit, customs law, administrative and constitutional law, as well as representing clients in tax disputes, at both, federal and state level; constitutional litigation and social security matters.
  • Some relevant judicial precedents of the Supreme Court of Justice and the former Federal Tribunal of Tax and Administrative Justice have been created by the issues discussed in trials sponsored.
  • Appeared in the historic public hearing of the Supreme Court of Justice to present arguments regarding the Amparo trial brought against the Single Business Tax Rate Act.
Languages. Spanish, English
Professional associations/memberships
  • Member of the International Bas Association (IBA).
  • Member of the Inter-Pacific Bar Association (IPBA).
  • Member of the Mexican Bar Association (MBA).
  • Member of the Canadian chamber of Commerce (CANCHAM).
  • Former Co-ordinator of the Tax Committee of the National Association of Business Lawyers’ Association.
  • Currently secretary of the National Board and National Executive Council of the Mexican Institute of Finance Executives (IMEF).
    Publications. Participated in interviews on television and radio on tax matters. Author of various publications in specialised journals on tax subjects.

 

Francisco Matus Bravo

 

Basham, Ringe & Correa, SC

T +52 55 52 61 05 89
F +52 55 52 61 04 96
E fmatus@basham.com.mx
W www.basham.com.mx/en/
Professional qualifications. Graduated from the Universidad Iberoamericana (IBERO); Master’s Degree in Taxation from Universidad Panamericana (UP)
Areas of practice. Tax consulting and human capital practices.
Recent transactions. Practice focuses on tax planning, consulting, and tax strategy, both nationally and internationally, including corporate and individual taxation, due diligence, corporate reorganisations, mergers, spin-offs and acquisitions, among others.
Languages. Spanish, English
Professional associations/memberships. Active member of the following associations and centres, among others:
  • International Fiscal Association (IFA) YIN (Mexico).
  • Asociacion Nacional de Abogados de Empresa (ANADE).
Publications. Author of various articles of local and international taxation and regularly performs as a speaker and panellist in various forums.

 

Norberto Ruiz

 

Basham, Ringe & Correa, SC

T +52 55 52 61 05 10
F +52 55 52 61 04 96
E nruiz@basham.com.mx
W www.basham.com.mx/en/
Professional qualifications. Graduated from the Instituto Tecnologico y de Estudios Superiores de Monterrey (ITESM) in 2011. Studying a Tax LLM in Universidad Panamericana. Diploma in Commercial Contracts from the Mexican Bar Association.
Areas of practice. Tax, with a focus on tax litigation.
Languages. Spanish, English
Professional associations/memberships. Active member of the Mexican Bar Association.

 

Arturo Palafox

 

Basham, Ringe & Correa, SC

T +52 55 52 61 05 68
F +52 55 52 61 04 96
E apalafox@basham.com.mx
W www.basham.com.mx/en/
Professional qualifications. Attorney’s degree by the Universidad Iberoamericana in 2006. Master’s degree in Criminal Science by the Universidad Anáhuac in 2011. Has attended several courses in the adversarial system of criminal justice concerning issues related with the prevention and identification of money laundering.
Areas of practice. Criminal tax law, with a focus on litigation of white collar and tax crimes.
Languages. Spanish, English
Professional associations/memberships
  • Active member in the Mexican Attorneys’ Bar (Barra Mexicana Colegio de Abogados) (AC).
  • Teacher in the “New System of Criminal Justice”, certified by the Technical Secretariat of the Co-ordination Board for the Inclusion of the System of Criminal Justice (SETEC).
  • Scholar at Universidad Iberoamericana head of the criminal process class.

Deja un comentario

Tu dirección de correo electrónico no será publicada. Los campos obligatorios están marcados con *