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.”  Based on the foregoing, upon publication of the names of the suppliers and service providers on the tax authorities’ list, all formal tax invoices that have been issued by such suppliers and service providers shall be invalid for tax purposes.

The Court’s decision significantly impacts companies that receive formal tax invoices, which in many cases are used to support income tax deductions or claim credits for Value Added Tax that has been previously paid for products or services, and corresponding applications for tax reimbursement or refunds.  Furthermore, if these formal tax invoices are deemed invalid, companies receiving them should take action to correct their tax records and filings.

As a result, it is recommended that companies continuously monitor all of their suppliers and service providers in order to verify that they are not found on the list detailing taxpayers that have carried out false or non-existent transactions.