September 23, 2021

Mexican Tax Authorities Issue “Invitation Letters” to Taxpayers Regarding Alleged Discrepancies in Reporting Expense Deductions

By Rene Cacheaux, Miriam Name, and Esteban Gómez Aguado

Mexican tax authorities are sending notices to taxpayers inviting them to review and, if necessary, correct their tax filings (“Invitation Letters”). The Invitation Letters identify alleged discrepancies between amounts taxpayers claimed as authorized deductions and the expense and invoicing information they provided to support such deductions.

It is important to review the Invitation Letter carefully because Mexico’s tax regulations provide for several legitimate deductions that do not necessarily tie into an Internet Digital Tax Invoice (“CFDI” for its acronym in Spanish). For example, investment deductions, annual adjustments for inflation, and exchange losses, among others, fall into this category. Legitimate discrepancies may also exist when a CFDI has been issued, but the deduction is filed for a different time period, such as in the case of payments to individuals or business entities.

Likewise, it is important to consider that information filed by taxpayers may trigger certain tax programs, and that the failure to respond to these Invitation Letters may be an additional factor that tax authorities will consider when determining whether or not to initiate an audit.

If the Invitation Letters do not include a deadline for clarifying the alleged discrepancies or, if applicable, to file the corresponding corrections, keep in mind that  Rule 2.11.14 of Mexico’s 2021 Miscellaneous Tax Rules and Decree 128/CFF of Annex 1-A of the aforementioned Rules, establish that taxpayers may make corrections or clarifications within 15 days following receipt an Invitation Letter.

Receipt of an Invitation Letter merits a case by case analysis for each taxpayer in order to review its compliance with tax matters and regulations, by using technological tools to identify the discrepancies mentioned in the Invitation Letters.