Published on December 8th, 2020, in the Mexican Official Gazette, the Decree reforming various provisions of the Mexican Income Tax Law (“MITL”), Value Added Tax Law (“VAT”), and the Federal Fiscal Code (“FFC”).
Therefore, we hereby share some considerations and comments about the Mexican Tax Reform for 2021:
A) Federal Fiscal Code (FFC).
- 1 General anti-avoidance rule (Article 5-A).
It is provided that regardless of the tax effects that the authority gives to legal acts carried out by taxpayers implementing this rule, the audits can also be carried out to determine criminal liabilities for the commission of the tax crimes.
Although the general anti-avoidance rule was included as of fiscal year 2020, it has not yet been applied by the tax authority, and it has not even been established how the collegiate organization formed by officials from the Mexican Ministry of Finance and Public Credit and the Tax Administration Service will function and how it will be integrated.
This provision is a fundamental change regarding the way that tax provisions will be understood, interpreted and applied in our country, because even though these are legal transactions, in case that the tax authorities consider that a tax benefit has been produced and that the act or series of legal acts does not have a legal reason to be implemented (business reason), Mexican tax authorities will be able to recharacterize the transaction and charge the corresponding tax effects.
- 2 Tax Mailbox schedule (Article 13).
It is specified that the schedule of the tax mailbox is the one that corresponds to the Central Zone of Mexico.
- 3 Installment sales with deferred or partial payments (Article 14).
In terms of the present reform, it shall be considered that transactions with deferred or partial payments are carried out when tax receipts are issued in accordance with the legal provisions in force of article 29-A, Section IV, second paragraph (simplified tax receipts) of the FFC.
- 4 Corporate spin-offs (Article 14-B).
The corporate spin-off will be considered as a sale for tax effects, even if the exception requirements set forth in Section II of provision 14-B of the FFC are fulfilled, in cases where as a result of this operation an item or concept arises in the stockholders’ equity of any of the companies involved that was not recorded or recognized in the statement of financial position of the general partners or shareholders meetings that agreed to the spin-off.
This exception could affect the transfer of certain intangible assets through the spin-off, for example, own brands.
- 5 Legal updates in recognized markets (Article 16-C).
Corporations that obtain a concession from the Ministry of Finance and Public Credit to act as a stock exchange are included as recognized markets.
- 6 Cancellation of digital stamps for invoice issuance due to presumption of non-existent operations and undue transmissions of tax losses (Article 17-H, sections XI y XII).
In terms of the present reform, it is included as an assumption for invalidating the digital stamp certificates (for the issuance of invoices) whenever the taxpayers that issue invoices do not disprove the presumption of non-existence of the transactions supported on the tax receipts issued and consequently, considered to be included on the definitive list in terms of article 69-B of the FFC.
It is as well included as an assumption for the invalidation of the digital stamp certificates, taxpayers that did not distort the presumption of unduly transferring tax losses and included in the definitive list of Article 69-B Bis of the FFC.
On the other hand, the term that the tax authorities count with to inform the corresponding resolution on the clarification procedure requested by the taxpayers to whom the digital stamp certificate is left without effect is extended from 3 to 10 days.
The addition to this provision in terms of the above-mentioned assumptions and their correlative repeal in Article 17-H-Bis of the CFF, implies that, due to these cases, the procedure of temporary restriction of digital seal certificates for the issuance of tax receipts (CFDI) will not have to be previously completed (regulated in the diverse article 17-H-Bis of the FFC).
- 7 Time limit for requesting clarification of temporary restriction of digital stamp certificates (Article 17-H Bis).
A term of 40 business days is established, so that the taxpayers who have been temporarily restricted from using the digital seal certificate may file the request for clarification to the corresponding tax authorities.
In case that the taxpayers do not request the clarification procedure derived from the temporary cancellation of the digital seal certificates, the tax authorities will proceed to void the corresponding certificates.
- 8 Messages of interest through tax mailbox (Article 17-K).
The taxpayer, in addition to receiving via tax mailbox the notification of any act or administrative resolution of the tax authorities, can now also receive, via tax mailbox, «messages of interest». These messages of interest may be benefits, facilities, invitations to programs, issues related to the tax situation of the taxpayers and information for the fulfillment of their tax obligations.
In addition, it is established that taxpayers who have been assigned a tax mailbox must consult it within the three days following the day in which they receive an electronic notice from the tax authorities through any means of contact that they have registered, being able to do so by e-mail or mobile phone number.
Although the tax mailbox came into effect on June 30th, 2014 and has functioned since then as a tool for the Tax Administration System to notify, send information for compliance with tax obligations, request information or require a response to a procedure, the tax authority continues to give greater importance and use to this means of communication, so it is vital that this electronic means is not underestimated and is verified daily to avoid any contingency for the taxpayer.
- 9 Lack of location of the taxpayers or their domicile in the refund procedures (Article 22).
During the refund procedures, the fact that the taxpayers or their domicile is not located is included as an assumption to have as not submitted the refund request.
When the refund request is deemed as not have been submitted, it will not be considered as a collection intent that interrupts the prescription of the authority’s obligation to return the favorable credit.
We consider that the amendment to Article 22 has positive aspects, since the proposal seeks to address and prevent the practice of some taxpayers by giving a non-existent tax address in their registration to the Mexican Federal Tax Registry (RFC) to carry out acts of tax evasion.
However, it is important that the tax authority evaluates and determines, in a correct and objective manner, the application of this cause, because it could affect those taxpayers who do fully comply with their tax obligations, and the delay in obtaining their refunds seriously and irreversibly affects their operation.
- 10 Modifications to the procedure for the exercise of verification faculties derived from refund requests. (Article 22-D, sections IV and VI).
The procedure for the exercise of verification faculties carried out by Mexican tax authorities regarding taxpayer´s refund requests was modified, proposing that in the event of several refund requests from the same taxpayer for the same type of contribution, the authority will only perform, for all the requests filed, a single exercise of verification power, or whenever it is applicable, audits will be carried out for each of the requests submitted and therefore only issuing for all of them, a single resolution.
The term for the Mexican tax authorities to issue and notify the taxpayers of the resolution of the procedure of verification faculties on the refund requests, was extended from ten to twenty business days.
This measure aims to make the refund procedure efficient and convenient, especially for cases in which the exercise of verification faculties is carried out to determine the provenance of the refund, a situation that is increasingly recurrent by the Mexican tax authority.
- 11 Joint liability (Article 26, sections XII y XIX).
Limits on joint liability in the specific case of corporate spin-offs are modified to indicate that this will not apply when, as a result of the transfer of assets, liabilities and capital, an element or concept arises in the stockholders’ equity of any of the companies, that was not recorded in any of the stockholders’ equity accounts of the statement of financial position approved by the general partners or shareholders meeting that agreed to the spin-off.
On the other hand, companies considered as tax residents in Mexico or residents abroad with a permanent establishment in the country that carry out operations with related parties abroad, over which there is considered to have effective control, are attributed with joint liability when the tax residents abroad constitute a permanent establishment in Mexico.
According to the initial proposal made and the explanatory memorandum of the tax reform, the Mexican tax authority has detected several cases where companies «transfer» to the spun-off companies’ «values» that did not exist before the spin-off through the sub-accounts of capital.
Therefore, the taxpayers, who even complying with all the requirements set forth by law, so there is no disposal for tax effects due to the spin-off, create a new account when approving the spin-off by the partners or shareholders meeting, must determine the tax effect to the spin-off as a transfer of the assets, since it will be considered by the authority as a sale.
An additional assumption of several liability was incorporated to guarantee that tax foreign resident companies with related parties in Mexico pay the corresponding tax for the operations they carry out through them, since if they do not do so, the companies considered as tax residents in Mexico or their permanent establishments will have to respond before the Mexican tax authority, in a joint and several liability, for the payment of the taxes therein incurred.
- 12 Mexican Federal Taxpayer Registry (RFC) (Article 27).
It is established the obligation for legal entities to file the notice at the Mexican Federal Taxpayer Registry (RFC) reporting any modification or incorporation of their partners or shareholders. The duty to file the notice includes analogous figures to those of a partner or shareholder regardless of the name they are designated (partners, employers, among others).
Legal entities whose purpose is different from an economic purpose and in which their participants are not jointly liable, without therefore meeting the characteristic of a partner or shareholder, are excluded from the obligation to file the mentioned notice.
In addition, faculties for the tax authorities to suspend or reduce the obligations of taxpayers registered in the Mexican Federal Taxpayer Registry (RFC) are included, in cases in which taxpayers have not carried out any activity during the last three fiscal years.
Finally, it is included that taxpayers submitting the cancellation notice at the Mexican Federal Taxpayer Registry, due to total liquidation of assets, ceasing of operations or mergers, must comply with a series of requirements established by the authorities through general rules, among the following:
- Taxpayers must not be subject to the exercise of verification faculties or have tax credits.
- Not to be found in the lists referred to in Articles 69-B (non-existent operations) and 69-B Bis (undue transfer of tax losses) of the FFC.
- The declared income and the tax withheld, as stated in the corresponding declarations, must be consistent with those indicated in the tax receipts, files, documents or databases of the Mexican tax authorities.
As it is well known, Article 27 of the FFC was recently amended to include, as an obligation of taxpayers for 2020, a notice submission at the Federal Taxpayer Registry stating the name and tax ID (RFC) of their partners and shareholders and must be submitted every time there is any modification or incorporation of them.
However, the Miscellaneous Tax Rules did not establish any distinction or exception regarding the legal entities that must provide this information, a situation that generated multiple doubts among taxpayers.
Thus, this amendment includes and clarifies that the information that must be submitted by legal entities which must correspond to the information related to the members of the legal entity which due to its analogous nature in essence, the functions, obligations and rights are similar to those of a partner or shareholder.
- 13 Tax Invoices (Articles 29 y 29-A).
The obligation to request the digital tax invoices was included for the cases when taxpayers carry out partial or deferred payments, export goods that are not subject to sale or whose sale is free of charge.
The digital stamp that is incorporated to the digital tax invoices, corresponds, exclusively, to that of the Tax Administration Service.
Certain administrative facilities are included so that taxpayers who do not have the federal taxpayer registry key can indicate the generic key established by the Tax Administration Service through general rules, considering the operation celebrated with the general public.
Furthermore, it is noted out in the file reform, that in cases when the payment is deferred or due in terms, a tax receipt must be issued for each payment; regardless of whether it corresponds to an advanced payment or subsequent.
Finally, it is stated that digital tax invoices, including those covering tax withholdings, must contain the requirements established by the Tax Administration Service.
As a brief summary, in terms of the file reform the following modifications where incorporated: (1) Two new scenarios in which taxpayers must request a digital tax receipt, for the following cases: (i) When taxpayers make partial or deferred payments and (ii) When they export goods that are not subject to sale or whose sale is free of charge; (2) The concept of transactions entered into with the general public is specified; (3) More catalogs were added to the digital tax receipts (CFDI) to avoid mistakes during the filling; and (4) In cases of deferred payments, a tax receipt must be issued when the transaction is made and another one at the time the payment is made, even if the payment is paid in one single exhibition.
- 14 Period for keeping accounting records (Article 30).
Taxpayers must keep in their accounting records, all documentation and information pertaining increases or decreases in capital stock; merger or spin-off of companies; distribution of dividends or profits; origin of balances in favor and movements of the net tax profit account, capital contribution account or any other tax or accounting involved.
This amendment is related to the information and documentation needed to implement the agreements reached as a result of the dispute resolution procedures to avoid double taxation.
Consequently, taxpayers must now keep the accounting and documentation related to the compliance with the tax provisions for as long as the company or agreement in question subsists, and not only for 5 years.
- 15 Accounting report (Article 32-B Bis).
Reports for high value financial accounts, new accounts, low value accounts and pre-existing accounts must be submitted no later than August 31st.
- 16 Tax assistance and diffusion (Article 33).
The free assistance to be granted by the tax authorities to the taxpayers is specified, informing about tax consequences in case of not complying with the various tax obligations. In case the explanation is about complex issues, they must provide printed or digital material that helps in the understanding of the subject involved.
A new faculty was granted to the tax authorities to inform taxpayers, on a periodic basis, of specific parameters regarding the profit, authorized deductible concepts or effective income tax rate based on the economic sector or industrial activity to which they belong.
The Tax Administration Service will implement voluntary compliance programs, through which it may inform taxpayers when they detect risk assumptions based on the aforementioned parameters, without considering the beginning of the exercise of its verification faculties.
Finally, in order to promote compliance on the filing of the returns, as well as corrections to the tax situation of the taxpayers, the tax authorities may send (i) proposals for payment or pre-filled returns, (ii) communications to promote compliance with their tax obligations, and (iii) communications to report detected inconsistencies or atypical behaviors.
The implementation of the above-mentioned methods that may be used by the tax authorities to assist taxpayers, is consistent with the purpose of the whole tax reform: to encourage and increase tax collection. Although generally this provision establishes methods that may not be considered as an exercise of verification by tax authorities, and are merely indicative, the above could be abused by tax authorities, who could pressure taxpayers, as well as consider that they do not comply with their obligations if they disagree with the parameters that will be established, or the pre-filled declarations, thus defining the result of the exercise of their verification faculties, even before they have started them.
- 17 Precautionary seizure of assets for third parties (Articles 40 y 40-A).
These articles are harmonized to include third parties related to taxpayers and/or jointly and severally liable parties, as subjects of precautionary seizure of assets regarding acts, information requests and documentation requirements, in accordance with what is established in the general rules issued by the Tax Administration Service.
It is also noted that, for third parties related to the taxpayer or jointly liable, the precautionary seizure of assets will be limited to one third of the amount of the operations, acts or activities they have carried out.
On the other hand, the order of priority of precautionary seizure of assets was modified and it is proposed to contemplate the following:
- Bank deposits and savings or investment components.
- Receivable accounts, stocks, bonuses, overdue coupons, property securities and easy receivable credits in charge of entities or Federation dependencies, states and municipalities and by institutions or companies of recognized solvency.
- Cash and precious metals.
- Real estate
- Property
- Negotiations
- Copyright; patents and registrations of utility models, industrial designs, trademarks and trade notices.
- Artistic works, scientific collections, jewelry, medals, weapons, antiques, as well as instruments of arts and crafts indistinctly.
Additionally, it is established that financial institutions or cooperative savings and loan societies may not deny taxpayers information about the authority that ordered the precautionary seizure.
In the initiative project of the file tax reform, was stated that the inclusion of the third parties related as subjects of the precautionary seizure was made to avoid the obstacle in the inspection of the companies that had as third parties related to companies that invoice simulated operations (EFOS), as well as those that received exorbitant income as presumed assimilated to salaries.
However, in the text approved by the House of Representatives, it does not make this precision or any other about who they refer to as «related third parties», which generates legal uncertainty among taxpayers and putting at risk, among others, suppliers, customers and employees of the companies.
The above, together with the changing on the priority order of precautionary insurance, in which bank deposits and receivable accounts are now in first place – facilitating the execution of the file figure – may result in a high degree of discretion or even arbitrariness by the tax authorities, since it was left to them to consider that they are «hindering» the inspection.
- 18 Verification faculties (Article 42, section V).
Through the file amendment, it was clarified that the provisions included on the Customs Law will be applicable when the field audit is carried out regarding some assumption of that matter.
The procedure of the express field audit includes taking partial or complementary reports (as in the case of home visits) so that the authorities can return to the home where the audit is being made, to carry out a second or subsequent procedure, when it is not possible to exhaust the review in a single one.
We consider that this modification denatures the express visit procedure, since its purpose is that the tax authority makes a quick visit, without any summon to notify the order to verify the compliance with tax and customs obligations that could be avoided by taxpayers if they had received prior notice such as the notification, reason why the visit had to be carried out in a single stage.
- 19 Field audit reports (Article 44).
It is established that the refusal of those taxpayers visited to sign the corresponding certificates or, as the case may be, to receive a copy of the corresponding acts, will be included in the minutes, without affecting their validity and probative value, and the proceedings will be concluded.
We consider this measure as risky and arbitrary, because the tax authorities through a malpractice may deliberately state that the taxpayer did not want to sign the acts or receive the corresponding copy, causing with them formal violations to the procedures of field audits.
- 20 Specific field audits (Articles 46, third paragraph of section IV and article 49).
Tax officials are entitled to carry out a field audit to evaluate the evidence exhibited by taxpayers to distort the irregularities detected in the last partial record.
Additionally, the definition of «circumstantial» has been established, being understood as to detail all the information and documentation obtained within the home visit through the analysis, review, comparison with the tax provisions, evaluation, estimation, appreciation, calculation, adjustment and perception made by the visitors, without this constituting an evaluation of the evidence.
The wording is adjusted and the procedure for field audits is clarified according to the following:
- Covering more places where the field audits can be carried out: offices, warehouses and stores.
- Various visiting records are referred, in order to allow visits to be carried out in more than one stage.
The amendments to the corresponding articles that regulate field audits are consistent with the increasing tax collection aim, by adding places where tax authorities can carry out their verification faculties and by giving officials more faculties of assessments.
- 21 Auditor report review (Article 52-A).
A right for Mexican tax authorities is established so that, during the exercise of their verification powers, they can require the public accountant not only to show the working papers prepared for the report, but also to appear personally to resolve the questions that the tax authorities may have.
The report review will be carried out exclusively with the public accountant who formulated the corresponding report, without legal representation.
In addition, it has been pointed out that the order established for the sequential review (accountant – taxpayer) should not be observed, when the object of the acts of verification are related to profits in matters of foreign trade derived from the authorization or concession granted for the provision of services of handling, storage and custody of goods.
- 22 Term to submit reports or documents (Article 53).
The time period for taxpayers to submit requirements made by the authority to exhibit documentation that they must have in their possession, in such cases when such documentation is considered as difficult to obtain, was extended from 6 days to 10 days.
- 23 Electronic reviews in foreign trade matters (Article 53-B).
The Mexican tax authority shall complete the electronic review procedure within a maximum period of 6 months after the issuance of the provisional resolution. The only exception, which continues to be under the 2 years rule, is in the case of procedures in which an international audit has been requested.
- 24 Presumption of undue transfer of the right to reduce tax losses (Article 69-B Bis).
It is presumed as a tax loss to be caused by a payment derived from the execution of any legal figure, and not only from the subscription of credit titles.
On the other hand, the term is extended by ten days so that the taxpayer can disprove the presumption.
It is provided that the Mexican tax authority, after exercising its verification faculties, may consider the undue transfer of the right to reduce tax losses as a simulated act for the purposes of tax crime provided in the Federal Fiscal Code (FFC).
- 25 Tax ombudsman agreements (Articles 69-C, 69-F and 69-H).
The period of time that taxpayers count with to request the adoption of a conclusive agreement is reduced, which may only be requested within 20 days from the date on which: (i) the final act is issued on a home visit, (ii) the observations act during a cabinet review is noticed, or (iii) the provisional review is noticed during an electronic review.
The following cases of inadmissibility to request the adoption of concluding agreements are established:
- When they derive from verification faculties exercised by the tax authorities to confirm the origin of a refund requested by the taxpayers.
- Regarding the exercise of verification faculties through third parties.
- Regarding acts derived from compliance with resolutions or judicial ruling.
- When a period of 15 days has elapsed after the date on which the final act is drawn up, or the notice of the observations statement has been made, or the provisional resolution is issued in an electronic review.
- In cases of the final stage of the procedure established in Article 69-B of the Federal Fiscal Code (companies invoicing simulated operations and listed in a presumed or definitive matter).
Additionally, it is specified that the conclusive agreement reached out through the Taxpayer´s Ombudsman (PRODECON) is not subject to dispute or challenge even under the Treaties to Avoid Double Taxation (Mutual Agreement Procedure MAP).
- 26 Fines related to transfer pricing and term adjustments (Article 75)
In supposed harmony with tax provisions on Transfer Pricing that exist in other countries, the reduction of fines determined for Transfer Pricing matters was eliminated, and, in addition, it is considered as an aggravating factor that the taxpayers have not correctly complied with their tax obligations regarding transfer pricing matter.
Taxpayers that pay the fines during the 30 days following the date in which their notification takes effect (previously 45 days were established), will obtain a 20% fine reduction, except in customs matters, when such reduction is requested based on Article 76 of the Federal Fiscal Code regarding arithmetic mistakes in the tax returns and paid based on Article 78.
It is very important to mention that as of the entry into force of the Mexican Tax Reform, since non-compliance with transfer pricing obligations is an aggravating factor, the tax authorities may determine that it is not appropriate to apply the 100% reduction of fines and surcharge rate for extension, given that one of the requirements to apply for them is not to have incurred in any of the aggravating factors referred to in Article 75 of the Federal Fiscal Code when the tax authorities impose the fine.
- 27 Infringement for concessionaries of public telecommunication networks (Article 90-A)
In relation to the proposed amendments to the Value Added Tax Law («VATL»), a fine of $500,000.00 to $1’000,000.00 Mexican pesos, is established for the concessionaires of a public telecommunications network in Mexico that do not comply with the corresponding blocking of internet access to digital service in terms of the VATL. This sanction is contemplated for each elapsed calendar month.
- 28 Standardization of definitions included in the Federal Fiscal Code. (Article 92)
It is considered as merchandise, the products, articles, effects and any other goods, even when in terms of other laws, such items are considered as inalienable or non-reducible to private property, established in terms of the Federal Fiscal Code and the Customs Law.
- 29 Presumption of smuggling (Article 103)
A fine of smuggling was added to the Federal Fiscal Code, in cases when temporarily imported goods are not returned, transferred or changed of customs regime for companies with a promotion program authorized by the Ministry of Economy.
This change affects entities with an export promotion program authorized by the Ministry of Economy that do not return the goods temporarily imported from:
- a) Fixed assets, machinery, equipment, tools, instruments, molds and spare parts, used for the production processes of the maquila).
- b) Equipment and apparatus for pollution control, research, training, industrial safety, telecommunications, computer, laboratory, product testing and quality control, and those directly involved in the handling of materials directly related to export plans.
- c) Equipment for administrative development.
With this amendment, compliance with the obligations related to export promotion programs acquires greater relevance, since, in an eventual cancellation of the authorization, risks of a criminal nature would be generated by not returning the temporarily imported assets abroad in time.
- 30 Documents in languages other than Spanish (Article 123)
In cases where the documents submitted by taxpayers in an administrative appeal of revocation are in a language other than Spanish, they must be accompanied by a translation.
- 31 Term for issuing resolutions (Article 133-A)
The time limit for the authority to comply with a resolution of a revocation appeal is homologated to the 30 days that taxpayers count with to challenge or dispute such resolution.
- 32 Personal notice (Article 137)
The notifying officers have the responsibility and duty to post the citations at the main entrance of the taxpayer’s domicile and in case no person is found to receive it or the person who is found refuses to receive it, a record of such circumstance must be drawn.
The notifying officer must be file on the day and hour indicated in the citations, to require the presence of the recipient of the notification, and in case he or she is not file, the notification will be made with whoever is at the domicile. In case they refuse to receive the notification, it will be done by any of the methods provided in terms of Article 134 FFC.
- 33 Notification by lists (Article 139)
Notices by lists including the corresponding document issued will be posted in a place open to the public in the tax authority’s offices, for 6 days.
During the same period, the notice and the corresponding document will be published on the tax authorities’ website. The notification will be considered to have been made on the seventh day from the day following that on which the document was posted or published.
- 34 Tax interest guarantee (Article 141)
The assets on which a seizure can be carried out in terms of the administrative matter with which the taxpayers guarantee the tax interest are limited, pointing out that they can only be tangible movable and immovable assets, except for rustic properties or business negotiations.
- 35 Update of the “guarantor” term (Article 143)
The term «guarantors» is changed to «institutions issuing bail policies» for the effective guarantees offered by the taxpayers, as well as the denomination of Mexican Federal Court of Tax and Administrative Justice for the current one of Federal Court of Administrative Justice.
In addition to clarifying that the collection procedure will be carried out in terms of Article 80 of the Federal Fiscal Code Regulations.
- 36 Credit seizure (Article 160)
Regarding the seizure of the taxpayer´s credit portfolio, it is specified through the present reform, that the tax authority must directly notify the debtors of the seizure.
The above amendment generates legal certainty for the debtor, in the same way the authority will require that they inform the characteristics of the contractual relationship that they have with the taxpayer, under the warning that, in case of noncompliance, a fine of $330.00 to $3,180.00 Mexican pesos will be imposed.
The payment to be made to the debtor, must be made directly to the tax authority, in the case of securities to order or bearer, the seizure can only be made by physically obtaining them.
It is important to emphasize on this stage, that once the payment of the credit to the seized by the debtor has been made, the tax authority will require it to deliver the tax receipt of the payment within three days.
- 37 Publication of the auction notice (Article 176)
In terms of the reform, the publication of the call for the auction procedure will be made the next day of the notification of the appraisal of the goods or assets and will be carried out through three electronic means.
The notice must include the goods to be auctioned, as well as the base value of the sale and the requirements for the bidders participating in the auction.
- 38 Creditors notice (Article 177)
Another method was incorporated to notify the creditors that appear in the lien certificate, which will be by platform, in case it cannot be done personally or by the Tax Mailbox.
Additionally, in case the notification can be made, the date in which the auction will take place will be considered notified, in that in which the call for meeting has been published.
- 39 Auction of goods (Article 183, 185 and 186)
The auction is understood to be in favor of the highest bidder who makes the best offer until the winner makes full payment of the bid offered and pays the balance of the amount offered through bank deposit.
- 40 Return of amounts paid by the bidder in the auction procedure (Article 188-Bis)
The moment from which the bidder can request the delivery of the amounts paid for the acquisition of the goods that could not be delivered due to the impossibility is specified, indicating that it will be within a period of 6 months from the date the authority reports the impossibility of delivery of the goods and in which the amount paid for those goods must be requested, which must be done within 2 months from the request.
The above mentioned provides legal certainty to the taxpayer who wins the auction by having a deadline or term to request the return of the amount paid for the acquisition of the goods in case of impossibility to deliver them.
- 41 Allocation of property and payment (Article 191)
The term «translation» was replaced by «adjudication», meaning as the act ordered by the tax authority upon payment in favor of the bidder who has made the winning bid.
When the award must be registered in the Public Registry of Property, the act of award will have the character of a public deed.
- 42 Abandonment of merchandise (Article 196-A)
It is established in terms of the file reform, that the tax authorities may notify, by any of the forms established under Article 134 of the Federal Fiscal Code, whenever the assets have been abandoned, instead of only notifying themselves personally or through a Tax Mailbox.
This change does not affect the figure of abandonment contained in the Customs Law, which provides various options for notifying the abandonment of goods in customs, being common the notification by stand courts.
Taxpayers subject to any of the procedures under Article 196-A of the Federal Fiscal Code must consider that, as of the entry into force of this amendment, they may be notified through stand courts, in cases where they are not located at the address registered in the Federal Taxpayer Registry (RFC), or when their domicile is not known, or when they oppose to the notification procedure, among other cases.
- 43 Transitional provisions.
For return procedures that are in process and in which a verification faculty has been initiated, the resolution must be issued in terms of the article prior to the entry into force of the reform.
In relation to the procedures of precautionary insurance of assets or the negotiation of the taxpayers or jointly liable parties and their removal, which are pending resolution, it must be substantiated and resolved in terms of Article 40-A of the Federal Fiscal Code in force before the tax reform for 2021, which will enter into force as of January 1st, 2021.
B) Mexican Income Tax Law (MITL)
- 44 Non-profit entities.
The tax regime applicable to non-profit legal entities was modified, among which the following stands out:
- Elimination of the School Programs, as authorized charities since they are considered to be in disuse.
- Entities or associations intended for the granting of scholarships; scientific or technological research; to the research or preservation of the flora or wild fauna, terrestrial or aquatic; or to the reproduction of species in protection and danger of extinction and to the conservation of their habitat, will only be able to be considered like non contributors of the income tax, when they obtain authorization to receive deductible donations of taxes.
A transitory article establishes that this amendment will enter into force on July 1, 2021.
- Any expense exceeding 2 thousand Mexican pesos, not supported by a digital tax invoice (CFDI), as well as those that are paid in cash, is considered as distributable residual.
This reform will be detrimental to many organizations that carry out their activities in communities where there is no possibility of obtaining tax receipts, which in turn may result in a decrease in actions aimed at favoring low-income sectors.
- Authorized charities who obtain income from activities other than those for which they were authorized, in a percentage greater than 50% of their total income for the fiscal year, will lose the corresponding authorization. In this case, the authorization may not be processed again, and all the assets must be allocated to another authorized charity.
The causes for revoking the authorization to receive deductible donations are added, as well as the applicable procedure for such revocation. - Among the causes for revocation of the authorization, it is established that if the charity counts with one or more legal representatives, partners or associates or any member of the Board of Directors or Administration of an organization whose authorization has been revoked within the last five years, because it was included in the list referred to in the fourth paragraph of article 69-B of the Federal Fiscal Code (issuance of invoices covering non-existent operations).
- If the authorization is revoked or when its validity has expired and it is not obtained again or renewed within 12 months from the date on which such events occur, the entire assets must be allocated to other entities authorized to receive deductible donations.
In this context, organizations that lose their authorization are no longer allowed to continue their activities and are forced to divest themselves of all their assets because they are no longer donors, which we consider unconstitutional.
- 45 Salary income
It is established that, in the case of income obtained by individuals for the concepts indicated below, they may only be considered as salaries when their annual amount, individually or as a whole, does not exceed 75 million Mexican pesos:
- Fees for services rendered predominantly to a client.
- Fees for the provision of independent personal services, obtained from legal entities or individuals with business activities, when the borrower is informed that the system of assimilated salaries has been chosen; and
- Income from business activities, obtained from legal entities or individuals with business activities, when the borrower is notified that the option for the salary assimilated regime has been chosen.
As of the following month in which the income exceeds the indicated amount, individuals must pay taxes under the corresponding regime.
- 46 Income from digital platforms
A fixed withholding rate is applied to the income received by individuals with business activity from the sale of goods or the provision of services through Internet, by means of technological platforms, computer applications and similar.
The withholding rate, depending on the activity, will be as follows:
| Actividad | Tasa de retención |
| Provision of land transport services for passengers and delivery of goods. | 2.1% |
| Lodging services | 4% |
| Sale of goods and provision of services | 1% |
- 47 Blocking access to the digital service
In line with the VAT Law amendments, it is established that the blocking of digital service providers considered as tax resident abroad without permanent establishment in Mexico, will also be carried out when those taxpayers incur in serious tax omissions in matters of income tax.
- 48 Maquilas
In accordance with the 2014 tax reform, the option for maquiladoras to obtain and retain transfer pricing documentation applying the operating profit transaction margin method (transfer pricing study) to demonstrate compliance with obligations for transactions with related parties considered tax resident abroad was eliminated.
In this sense, the only option for maquiladoras to confirm that they are complying with the provisions of the aforementioned articles is a particular resolution through an Advance Pricing Agreement (APA) or the calculation of the safe harbor indicated under Article 182 of the Mexican Income Tax Law.
This measure is consistent with the policy that the Tax Administration Service has maintained to promote the use of APA’s, including the recent renewal of an agreement signed between the Tax Administration Service and the United States Government, for the purpose of obtaining an APA through the procedure known as fast-track.
C) Value Added Tax Law (VATL)
- 49 Digital services
As of June 1, 2020, Chapter III BIS of the VATL came into force, relating to the provision of digital services by residents abroad without an establishment in Mexico.
In such regard, the following adjustments are made to the new digital services tax regime:
- The provision that digital services through intermediation of third parties, whose purpose is the disposal of used personal property, are not subject to VAT was eliminated.
- Foreign residents who provide digital services to clients in Mexico through intermediaries (foreign or domestic) are considered as released from the obligation to withhold VAT, as well as to register with the Federal Taxpayer Registry and provide information to the SAT, among others. The providers of intermediation services will be obliged to withhold 100% of the VAT charged.
- The intermediary platforms may omit the publication of the price of the goods or services they market without breaking down the VAT, to the extent that it is included in the price of such goods or services and they publish them with the legend «VAT included».
- Suppliers of digital services will be sanctioned, with the blocking of access to the digital service through the concessionaires of public telecommunications networks, in case of failure to comply with a relevant formal obligation, such as the obligation to withhold VAT, register at the Tax Administration Service, appoint a legal representative and an address in the national territory, among others. Prior to the issuance of the blocking order, the procedure contemplated must be followed so that the taxpayer provides information to distort the facts.
- 50 Exemption for medical professional services
Medical professional services provided by individuals through private assistance or charitable institutions are exempt from VAT.
D) Federal Revenue Law
The Federal Revenue Law (FRL) projects a participative federal collection of 3 trillion 351 thousand 759.7 million Mexican pesos, which refiles more than 100 billion pesos compared to what was established last year, which should increase the supervision by the authorities.
Within the macroeconomic framework, the following is predicted:
- Gross domestic product (GDP) growth: 4.6% (which could be adjusted considering the availability of the vaccine against the disease generated by the SARS-CoV2 virus (COVID-19).
- Inflation: 3%.
- Average exchange rate: $22.10
- Interest rate (CETES 28 days): 4%
- Oil (USD/Barrel): $42.10
The current surcharge rates for extensions are maintained, 0.98% per month on unpaid balances; 1.26% per month for installment payments in installments of up to 12 months; 1.53% per month for installment payments in installments of more than 12 months; and 1.82% per month for installment payments in installments of more than 24 months.
The financial system’s withholding tax rate on interest paid is reduced from 1.45% to 0.97% annualized.
A tax incentive is included so that individuals and entities considered as tax resident in Mexico that sell books, newspapers and magazines may apply an additional deduction for income tax in an amount equivalent to 8% of the acquisition cost of such assets.
The lawyers of the tax area of the Firm look forward on commenting any doubt regarding the content of this document.
S I N C E R E L Y,
Gerardo Nieto
nieto@basham.com.mx
Gil Zenteno
zenteno@basham.com.mx
Alejandro Barrera
barrera@basham.com.mx
Sergio Barajas
barajas@basham.com.mx
Víctor Barajas
mbarajas@basham.com.mx
Francisco J. Matus Bravo
fmatus@basham.com.mx
Mexico City, December 31st, 2020.
