Tax Articles

June 17, 2021

New Rules on Capitalizing Liabilities for Tax Purposes

By Miriam Name and Esteban Gómez Aguado

On December 8, 2020, Mexico published important new Miscellaneous Tax Rules amending numerous tax regulations in the Official Journal of the Federation. Article 30 of the Federal Tax Code is among the regulations amended, and the latest rules introduce new obligations with respect to maintaining supporting documents demonstrating the economic reasons behind corporate capital increases and decreases. In regard to capital increases resulting from a capitalization of liabilities, in addition to the corporate meeting minutes approving such increases, companies must also provide a certification that, from an accounting perspective, shows the existence of the liabilities and their corresponding values. The certification must be issued in compliance with the requirements set forth in the general rules issued by Mexican tax authorities … read more

April 27, 2021

Mexico Publishes Amendments to 2021 Miscellaneous Tax Resolution

By Miriam Name and Esteban Gómez Aguado

On April 5, 2021, Mexico’s Tax Administration Service published  the Fifth Anticipated Version of the First Resolution Modifying the 2021 Miscellaneous Tax Resolution and its annexes 1-A and 9. The changes, published on the agency’s website, entered into force the day following their publication in the Official Journal of the Federation. Note, however, that certain specific rules will enter into force in accordance with the Transitional Articles of the new decree. The most relevant aspects are summarized as follows: a) It will be now possible for Authorized Tax-Exempt Donees to request the cancelation of the permit to receive deductible donations by filing such request through their electronic tax mailbox. If the application for cancelation, revocation, conclusion or termination of the … read more

February 23, 2021

Mexico Issues New Requirements for Reporting Increases in Capital

By Esteban Gómez Aguado

For Mexican entities approving capital stock increases or decreases occurring December 31, 2020 or before, Article 30 of the Mexican Federal Tax Code provided that taxpayers were required to maintain records of all minutes and certificates relating to such transactions. However, beginning January 1, 2021, Mexican tax authorities now may require additional information from Mexican entities evidencing the economic substance of the increases or decreases in their capital stock. Accordingly, taxpayers who increase their capital stock through the capitalization of liabilities must,  in addition to keeping accounting records, meeting minutes, account statements and, where appropriate, appraisals of the goods contributed, maintain a document certifying both the accounting existence of the liability in question and its value. Such certification must comply … read more

February 22, 2021

Mexico Modifies Rules for Reporting Intercompany Loans between Related Companies

By Esteban Gómez Aguado

On January 18, 2021, the Financial Intelligence Unit (“FIU”) of Mexico’s Tax Administration Service modified applicable rules governing loans made between entities that belong to the same business group.  This provides clarity to one of the most frequently asked questions regarding so called “vulnerable transactions” and mandatory compliance with the Federal Law for the Prevention and Identification of Transactions Conducted with Resources of Illicit Origin (“Anti-Money Laundering Law”). Put succinctly, the question is: “Will centralized treasury operations and/or intercompany loans made between companies from the same Business Group be considered vulnerable transactions?” Article 27 Bis, section I, subsection a) of the General Rules referred to in the Anti-Money Laundering Law (the “Rules”), establishes that loan transactions entered into between companies … read more

November 17, 2020

Mexico Now Requires Disclosure of Aggressive Tax Planning Transactions

By Miriam Name and Esteban Gómez Aguado

The Mexican omnibus tax bill for 2020 was published in the Official Journal of the Federation on December 9, 2019. Among other changes, a new Section, “Regarding the Disclosure of Reportable Transactions,” was added to the Mexican Federal Tax Code (“CFF” for its acronym in Spanish), which sets forth a mandatory disclosure or reporting requirement for certain transactions including or involving tax planning structures (“Reportable Transaction”). Depending on the date of implementation of the tax planning transaction and other factors, the tax planning transactions must be disclosed or reported by either the tax advisor involved or the corresponding taxpayer. The primary objective of the new reporting requirement is to prevent transactions that involve aggressive tax planning. As a practical matter, … read more

November 2, 2020

Considerations in Mexico Relating to Taxpayers Conducting Presumptively Non-Existent Transactions

By Esteban Gómez Aguado

Article 69-B of the Mexican Federal Tax Code sets forth a procedure to be followed by taxpayers who contract with suppliers of goods or services who, pursuant to public information published in the Official Journal of the Federation and on the Tax Administration Service website on a quarterly basis, are listed as companies that invoice simulated (non-existent) transactions (“EFOS” by its initials in Spanish). Compliance with the aforementioned procedure is important because if the veracity of a transaction is questioned and cannot be proven to have actually occurred, then the taxpayer’s tax receipts from the EFOS are considered null with no tax effect, meaning that the expenses may neither be deducted for income tax purposes nor creditable for value added … read more

July 28, 2020

Reductions in Estimated Income Tax Payments in Mexico

By Miriam Name and Esteban Gómez Aguado

The COVID-19 pandemic is causing a steep drop in revenues for Mexican companies during fiscal year 2020, which will also result in decreased net income and, in many cases, negative cash balances. Mexican companies will need to keep a close eye on their cash flow and analyze strategies and options to improve their cash balances. One strategy that should be considered involves a reduction of estimated income tax payments, paid on a monthly basis to cover the total annual income tax incurred. The estimated income tax payments for 2020 are being calculated based on an amount of net income that is potentially too high, compared to the likely net income that will actually be received this fiscal year. Article 14 … read more

April 6, 2019

Mexico Enacts Important Tax Law Changes Eliminating Universal Tax Credit Offsets

By Miriam Name and Edgar González

Mexico’s federal Congress recently enacted the 2019 Federal Revenue Law (the “Revenue Law”). An important change in Article 25, paragraph VI of the Revenue Law sets forth numerous limitations on tax credits, including an elimination of taxpayers’ ability to credit or offset all types of federal taxes against each other on a universal basis. The purpose of such new limitations is supposedly to combat tax evasion in Mexico. The Revenue Law now provides that taxpayers may “net out” positive balances against amounts owed only if both balances or amounts are for the same type of tax (e.g. Mexican income tax). The Revenue Law further provides that taxpayers with positive Value Added Tax balances may only credit or offset such tax … read more

February 22, 2019

Mexico Implements New Deductibility Rules for Tax Losses

By Miriam Name and Edgar González

The presumption may be made by the tax authority when it detects that a taxpayer has claimed deductions based on tax losses in any of the following scenarios: The taxpayer declared tax losses in any of the three fiscal years subsequent to its formation, in an amount greater than the value of its assets, and more than half of its deductions are related to transactions with related parties. The taxpayer declared losses after the three fiscal years following its formation, with more than half of its deductions relating to transactions with related parties, and such deductions would have increased by more than fifty percent (50%) with respect to those tax losses incurred in the immediately preceding fiscal year. The taxpayer … read more

May 2, 2018

Constitutionality of Lists Detailing Taxpayers Who Conduct False or Non-Existent Transactions

By Miriam Name and Fernando Juarez

In proceedings on February 7, 2018, Mexico’s Supreme Court held that lists of taxpayers detailing those who carried out false or non-existent transactions, as published in conformity with Article 69-B of the Mexican Federal Tax Code, are constitutional. This ruling is important because it means that all taxpayers must pay special attention and confirm that their suppliers and service providers are not found to be on such lists. Article 69-B of the Federal Tax Code establishes that when a supplier or service provider issues formal tax invoices without actually possessing the assets, personnel, infrastructure or capacity to provide the services or produce the goods being sold, the authorities will presume that such transaction did not occur, and, therefore, is “non-existent.”  … read more