Tax Articles

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

January 12, 2018
Tax Incentives and New Customs Regime in Special Economic Zones

Tax Incentives and New Customs Regime in Special Economic Zones

By Fernando Juárez and Miriam Name

On September 29, 2017, the Declaration of the Special Economic Zones of Puerto Chiapas (Chiapas), Coatzacoalcos (Veracruz) and Lázaro Cárdenas-La Unión (Michoacán) (the “Zones”) was officially published. In the new Decree, various tax benefits were granted to investors who participate in these areas. Among the most notable benefits is the reduction of Income Tax (ISR) payments. Such benefit will reduce payments up to 100% for the first 10 years, and a reduction up to 50% of the tax incurred for an additional five years. In addition to the above, there is a 50% reduction in employer/employee quotas during the first 10 years and 25% in the subsequent five years. As a general rule, transactions carried out within the Zones are … read more

January 12, 2018
General Import and Export Tax and Tariff Modifications

General Import and Export Tax and Tariff Modifications

By Edmundo Elías and Marisol de León

As part of the structural reform process of the General Import and Export Tariff and Tax Modifications (TIGIE) currently underway, which was discussed in issue 139 of this publication, Mexico’s President recently published a Decree that modifies Chapter 60 of the TIGIE, including the following decrees, in order to be consistent with such modifications: Decree Establishing the General Import Tax for the Border Region. Decree for the Promotion of the Manufacturing, Maquiladora and Export Services Industries (IMMEX Decree). The main changes that affect the textile industry are as follows: 120 tariff classifications were included, identifying in greater detail various goods from the textile industry, which result from the breaking down of 61 prior tariff classifications. The new 120 tariff classifications … read more

September 15, 2017

BEPS Modifications to Determine Permanent Establishment

By Miriam Name and Fernando Juárez

On June 7, 2017, Mexican tax representatives participated in the execution of the “Multilateral Convention for the Implementation of Measures Related to Tax Treaties to Prevent the Erosion of Taxable Amounts and the Transfer of Benefits” (also known as “Multilateral Instrument” or “MLI”) of the Economic Cooperation and Development Organization (OECD). After such execution, Mexico and more than 70 countries (excluding the United States) have joined forces with the objective of implementing the anti-erosion measures established by the BEPS (Base Erosion and Profit Shifting) report. Among the most important changes is the concept of “permanent establishment” on income and estate taxes as established in the OECD Model Tax Convention. In this sense, through the proposed modifications, it is determined whether … read more

December 15, 2016

Outsourcing and Money Laundering. New Interpretation by the Fiscal Authorities, by Miriam Name and Fernando Juárez

In recent days, the Unit of Financial Intelligence (UFI) of the Department of the Treasury and Public Credit issued new criteria identifying outsourcing as a vulnerable activity for purposes of the Federal Law for the Prevention and Identification of Transactions with Resources from Illicit Sources (LFPIORRC, for its Spanish acronym or Anti-Money Laundering Law).   By means of such criteria, the UFI determined that providing independent professional services (outsourcing) is a vulnerable activity pursuant to the terms of the Anti-Money Laundering Law.  Consequently, all Companies that provide personnel services, whether to related parties or to third parties, are subject to the regulations of the Anti-Money Laundering Law, and, therefore, must identify such transactions and provide required notices and reports contained … read more