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 for such purposes.

This particular amendment also contains a special provision that allows tax authorities to issue general rules to set forth the requirements for companies to make such certifications showing the accounting existence of the capitalized liabilities and their corresponding values.

By means of the 2021 Miscellaneous Tax Rules published in the Official Journal of the Federation on December 29, 2020, a new rule was added: 2.8.1.23 “Certification of accounting existence of liabilities and their corresponding values”, which provides that such certification must be issued by a Registered Public Accountant, and shall include among other items, information which allows for the identification of the taxpayer, entity, or other legal figure that incurred the obligation in relation to which the liability was incurred, the document giving rise to such liability, and the value of such as of the date of capitalization, along with documents which prove that the amounts arising from the capitalized liabilities were in fact delivered.

Depending on the origin of the liabilities to be capitalized, the aforementioned certification may include more information processes, internal controls, and detailed descriptions of many types of transactions.  Therefore, it is advisable to plan the execution of such certification in advance, and that the required information be at hand on the date the capitalization of liabilities is approved.

Both article 30 of the Federal Tax Code and Rule 2.8.1.23 of the 2021 Miscellaneous Tax Rules entered into force on January 1, 2021. Thus, taxpayers should review the scope of such provisions to be able to comply with their corresponding obligations.