On November 12, 2021, the Decree amending, adding and repealing several provisions of the Income Tax Law, the Value Added Tax Law, the Special Tax on Production and Services Law, the Federal New Automobile Tax Law, the Federal Tax Code and other laws (the “Decree”) was published in the Official Gazette of the Federation (“DOF”), which became effective on January 1, 2022.
By means of the Decree, several amendments and additions were made to the Federal Fiscal Code (“Código Fiscal de la Federación” or “CFF”), the Income Tax Law (“Ley del Impuesto sobre la Renta” or “LISR”) and the Value Added Tax Law (“Ley del Impuesto al Valor Agregado” or “LIVA”). The main changes include the following:
I. FEDERAL TAX CODE
1.- Business reason and additional requirements in merger or spin-off of companies. Derived from the Decree, Article 14-B of the CFF establishes that when a spin-off or merger of companies is carried out and from such operations arise items in the stockholders’ equity of the companies involved that were not previously recorded in the financial statements that were approved to carry out the merger or spin-off, it cannot be considered that a tax disposal of the assets transferred in such acts was not carried out. In this case, if a review by the tax authorities shows that the transaction lacked a business reason, it will be considered that there was a disposal of assets.
It is clarified that in a spin-off the transfer of capital is the transfer of capital stock and not the transfer of various items of stockholders’ equity. Also, in accordance with the previous measures, a new obligation is established for a certified public accountant to issue an opinion on the financial statements used to carry out the merger or spin-off.
A power is also implemented for the tax authorities to consider relevant transactions (specified in Article 14-B of the CFF) that have been carried out within the five (5) years prior to and the five (5) years after the merger or spin-off, in order to verify the business reason for the merger or spin-off. For such purposes, taxpayers are required to disclose the relevant transactions carried out within five (5) years following the merger or spin-off.
2.- Addition and modification of assumptions for temporary restriction of digital seal certificates. A second paragraph was added to section I of Article 17-H Bis of the CFF to allow the tax authority to temporarily restrict digital seal certificates (“CSD”) when taxpayers who pay taxes under the Simplified Trust Regime do not make three (3) or more monthly payments in a calendar year or fail to file the annual tax return.
A second paragraph was also added to section III of this article, allowing CSDs to be temporarily restricted when taxpayers: (i) object to the visit being made at the tax domicile, (ii) do not provide data and reports legally required by the tax authority, and (iii) do not provide the accounting or part of it, the content of the securities boxes and, in general, the elements required to verify their own or third parties’ obligations, as well as not providing the information required in the electronic reviews.
This restriction will only be applicable once the authorities notify the taxpayer of the fine for recidivism.
Likewise, section V of the aforementioned article was amended to provide that the tax authority may also restrict the CSD to taxpayers who do not prove that they did not carry out transactions with taxpayers included in the definitive list referred to in article 69-B of the CFF.
With respect to section VII of this provision, its content was modified to now allow the tax authorities to temporarily restrict the CSD based on inconsistencies detected between the value of the taxable acts or activities stated in the provisional or definitive tax returns, or in the informative returns. This section opens the door for the tax authority to restrict taxpayers’ stamps without exercising its verification powers.
Finally, a section XI was added to article 17-H Bis of the CFF. This section provides that the CSD of a legal entity that has a partner or shareholder (with effective control) whose CSD has been terminated and whose tax situation has not been corrected, may be temporarily restricted. The CSD of a legal entity that has a partner or shareholder who, in turn, is a partner or shareholder of another legal entity whose certificates have been revoked and whose tax situation has not been corrected, may also be restricted.
3.- Presumption of acquisition of the negotiation. For purposes of determining joint and several liability in terms of Article 26 of the CFF, the Decree added a presumption to Section IV of said Article to consider the different situations in which the acquisition of a business is presumed to exist. With this, the tax authority will be able to use such presumption to determine in a simpler way the joint and several liability of the acquirer of the business with respect to the taxes caused by the transaction.
4.- Registration in the Federal Taxpayers’ Registry of individuals of legal age. It is mandatory for individuals of legal age to register in the Federal Taxpayers Registry (“R.F.C.”), clarifying that individuals who do not carry out economic activities will not have tax obligations as long as they do not carry out economic activities. For such purposes, the possibility of registering in the R.F.C. under the heading “Registration of individuals with no activity” is provided for.
5.- Notice of partners and shareholders. Although there was already an obligation for legal entities to file a notice in which they provide diverse information on their partners, shareholders, associates and others that are part of the organizational structure of the company each time there is a modification, the Decree establishes that information must also be provided regarding the percentage of participation of each of such partners, shareholders, associates, etc., in the capital stock, as well as the corporate purpose and who exercises effective control.
In the case of companies that have shares placed among the general investor public, information must be presented regarding the persons who have control, significant influence or commanding power within the company, as well as the names of the common representatives, RFC code and shareholding percentage.
6.- Requirements and cancellation of the Digital Tax Receipts by Internet. Section I of Article 29-A of the CFF was amended, making it mandatory for taxpayers who have more than one place of business or establishment to indicate in the Digital Tax Receipts by Internet (“CFDI”) they issue the address of the place of business or establishment where they were issued. Section IV was also amended to now contemplate that the name, company name or corporate name and zip code of the taxpayer receiving the CFDI must be added to the CFDI.
Regarding the cancellation of CFDIs, several paragraphs were added to Article 29-A of the CFF to regulate the deadlines and requirements that taxpayers must comply with when issuing CFDIs.
a) Deadline. As a general rule, CFDIs can only be cancelled in the fiscal year in which they were issued, unless another tax provision provides for a shorter term.
b) Requirements. That the receiver has accepted its cancellation through the means and forms established by the Tax Administration Service. When the cancelled CFDI covers income, the reason for the cancellation must be justified and supported.
7.- Obligation to report financial statements. Article 32-A of the CFF was amended to expressly contemplate the obligation of corporations to have their financial statements audited by a registered public accountant, no later than May 15 of the immediately following year, when in the immediately preceding fiscal year they declare accumulated income equal to or greater than $1’650,490,600.00 (One billion six hundred and fifty million four hundred and ninety thousand six hundred pesos, 00/100 M.N.).
Regardless of whether they declare such amount of accrued income, legal entities that at the close of the immediately preceding fiscal year have shares placed among the general public investors in a stock exchange must have their financial statements audited by a registered public accountant.
Article 32-H of the CFF was also amended to require taxpayers that are related parties of parties required to report their financial statements to submit information on their tax situation.
8.- Exceptions to tax secrecy by the tax authority. An exception to the tax secrecy that must be kept by the tax authorities is established, which means that tax secrecy will not be applicable to the following taxpayers: (i) whose CSDs have been terminated by the tax authorities for failure to cure the irregularities on the basis of which they were temporarily restricted, (ii) those who issued vouchers that cover allegedly non-existent transactions and have not been able to rebut such presumption, and (iii) the taxpayers have not rebutted the presumption of having unduly transferred tax losses.
9.- Obligation of registered public accountants to inform the Tax Administration Service of non-compliance. A third paragraph was added to Section III of Article 52 of the CFF to contemplate the obligation of registered public accountants to inform the tax authority of noncompliance with tax and customs provisions by legal entities, as well as the possible commission of a tax offense by virtue of the preparation of the financial statement report.
The registered public accountant who fails to comply with the above, may be fined for the infraction of Article 91-A of the CFF and may be held responsible for the commission of the crime of concealment of tax crimes, in terms of Section III of Article 96 of the CFF.
10.- Garnishment via Tax Mailbox. Article 151 Bis was added to the CFF to allow the Tax Administration Service to carry out the procedure of seizure of assets through the Tax Mailbox. The foregoing may be carried out provided that the tax credits are enforceable and that the assets to be seized fall within one of the following cases:
a) Bank deposits, savings or investment components associated with life insurance that are not part of the premium to be paid for the payment of such insurance, or any other deposit in local or foreign currency made in any type of account held in the taxpayer’s name in any of the financial institutions or savings and loan cooperative societies.
b) Stocks, bonds, matured coupons, marketable securities and, in general, credits of immediate and easy collection from entities or agencies of the Federation, States and Municipalities and from institutions or companies of recognized solvency.
c) Real estate.
d) Intangible assets.
11.- Deadline to conclude the conclusive agreements. The content of Article 69-G of the CFF was amended to specify that the conclusive agreement procedure may not exceed a term of twelve (12) months, counted from the date the taxpayer files the request before the Procuraduría de la Defensa del Contribuyente (Taxpayer’s Defense Attorney’s Office).
Pursuant to Article Eight, Section III of the Transitory Provisions of the CFF, the conclusive agreements that have been requested before January 1, 2022 and that are in process, must be concluded within a term not to exceed twelve (12) months, counted as of the entry into force of the Decree.
II. INCOME TAX LAW
1.- Backed loans. A new paragraph was added to Article 11 of the Income Tax Law to establish that financing transactions from which interest is derived by legal entities or permanent establishments in the country of foreign residents, other than the transactions contemplated in Article 11, will be considered as supported credits when they lack a business reason.
2.- Informative declaration of institutions of the financial system. In order to provide the tax authorities with timely information for the exercise of their verification powers, Article 55, Section IV of the Income Tax Law was amended to establish that the institutions that are part of the financial system must report the receipt of cash deposits that, on a monthly basis, exceed $15,000.00 (Fifteen thousand pesos, 00/100 M.N.).
Although such obligation already existed, the financial system institutions were required to submit an annual report; therefore, the amendment consists in the fact that the reports must be submitted on a monthly basis, no later than the seventeenth (17th) day of the following month.
3.- Deduction of bad debts. The requirements for the deduction of bad debts are modified by amending Article 27, Section XV, second paragraph, paragraph b) of the Income Tax Law, to establish that there is a notorious impossibility to collect the debts until the moment in which all legal means have been exhausted to obtain their collection and that, having the right to collect them, it was not possible to recover them.
Based on the reform, it will not be sufficient to demand compliance with the payment or to initiate arbitration proceedings, but all possible steps must be taken to obtain a favorable result for the taxpayer’s interests.
4.- Related party obligations. In the case of transactions between related parties, Article 76, Sections IX and X of the Income Tax Law is amended to establish that the obligation to keep the supporting documentation that proves that the transactions were carried out at market value also extends to transactions carried out between related parties resident in Mexican territory.
Articles 76 and 76-A of the Income Tax Law are amended to establish that master and country-by-country information returns of related parties must be filed no later than December 31 of the year immediately following the respective fiscal year. On the other hand, it is stated that the local information return of related parties must be filed no later than May 15 of the immediately following year.
5.- Notice of disposal of shares. In the case of corporations, a new obligation is added to article 76, section XX of the Income Tax Law, consisting of informing the tax authorities about the sale of shares or securities representing the ownership of property owned by the taxpayer, carried out between residents abroad without a permanent establishment in Mexico. The notice shall be made by means of a form to be published by the Tax Administration Service and must be filed within the month following the month in which the transaction is carried out.
If such obligation is omitted, the companies issuing the shares will be considered jointly and severally liable for the payment of the tax derived from the transaction.
6.- Donations, personal retirement plans and supplemental retirement contributions. Article 151 of the Income Tax Law was amended to include deductions consisting of non-monetary or non-remunerative donations or complementary retirement contributions made by individuals in the general limit for personal deductions. Said limit is maintained at the lesser of five (5) times the annual value of the Unidad de Medida y Actualizacion y Actualizacion or fifteen percent (15%) of the total income of the taxpayer.
Prior to the reform, individual taxpayers were allowed to make additional deductions for such items, granting them a different limitation to the one already mentioned. However, with the reform, all deductions are subject to the same limitation.
7.- Comparable transactions for residents abroad. Article 153 of the Income Tax Law was amended by adding a second paragraph which establishes that taxpayers resident abroad who obtain income from sources of wealth in Mexican territory must determine their income, earnings, profits and deductions derived from transactions with related parties based on the prices and amounts of consideration or profit margins that they would have used or obtained with or between independent parties in comparable transactions.
8.- Income from acquisition of goods by residents abroad. Prior to the amendment, the fifth paragraph of Article 160 of the Income Tax Law established that when the tax authority conducted an appraisal of a real estate property located in Mexican territory, The fifth paragraph of Article 160 of the LISR established that when the tax authority conducted an appraisal of a real estate property located in Mexican territory that had been acquired by a resident abroad and such appraisal exceeded by more than ten percent (10%) of the agreed consideration for the sale, the total difference would be considered as income for the acquirer resident abroad, applying to such amount a rate of twenty-five percent (25%), without any deduction whatsoever.
In this regard, Article 160, paragraph five of the Income Tax Law is amended to establish that, in the event that the tax authorities determine a tax liability derived from the observation of a difference in excess of the ten percent (10%) indicated, the transferor resident in Mexico or resident abroad with a permanent establishment in Mexico will have the obligation to pay the corresponding tax, substituting the foreigner in such obligation.
9.- Disposal of shares and securities with source of wealth in the national territory. In cases of disposal of shares or securities that represent the ownership of assets and such transactions are carried out between related parties, a new obligation is established for the public accountant to report in the opinion on the disposal of shares not only the book value of the shares, but also to include the supporting documentation that proves that the sale price corresponds to the price that would have been used by independent parties in comparable transactions.
10.- Legal representation of foreign residents. The first paragraph of Article 174 of the Income Tax Law is amended to establish that the legal representatives of foreign residents must voluntarily assume joint and several liability for the payment of the taxes caused by the foreign resident.
To ensure the above, the reform establishes as an obligation that the designated legal representative must have full solvency and prove it with sufficient assets to ensure compliance with the corresponding tax obligation.
11.- Maquiladora companies. Prior to the reform, maquiladora companies were required to file a written document with the tax authorities to prove that the taxable income for the year represented at least the greater of six point nine percent (6.9%) of the value of assets or six point five percent (6.5%) of the total amount of costs and expenses incurred in the operation (Safe Harbor method).
However, the Decree eliminated such obligation as an administrative simplification measure and proposed to amend Article 182, second paragraph of the LISR, to establish as a requirement for compliance with its transfer pricing obligations to file the informative declaration of its maquila operations, including the calculation of the tax profit by the maquiladora companies and the data taken into account for such calculation, adhering to the Safe Harbor method foreseen for maquiladora companies.
The administrative facility for maquiladoras to obtain a particular resolution from the tax authority to confirm compliance with transfer pricing obligations was also eliminated, due to the uncertainty that this measure has generated regarding the correct compliance of taxpayers’ tax obligations.
12.- Simplified Trust Regime. This regime constitutes a new model for the integration of both individuals and corporations, with the purpose of promoting economic reactivation through a scheme to simplify taxpayers’ compliance with their tax obligations.
a) Application of the regime to legal entities. The Simplified Trust Regime (“RESICO”) is available to legal entities residing in Mexico whose total income in the immediately preceding fiscal year does not exceed $35’000,000.00 (Thirty-five million pesos, 00/100 M.N.) and which are only constituted and integrated by individuals.
They cannot access RESICO: (i) legal entities that have one or more partners, shareholders or members that participate in other companies in which they have control of the company or its management, or when they are related parties, (ii) taxpayers that carry out activities through trusts or joint ventures, (iii) credit, insurance and bonding institutions, general deposit warehouses, financial leasing companies, credit unions, integrating and integrated companies, legal entities engaged in livestock, forestry and fishing activities, as well as non-profit legal entities; and (iv) production cooperative societies.
RESICO provides for the possibility that income may be accrued on a flow basis, i.e., at the time it is actually received and, on the other hand, that deductions may be made at the time they are actually paid.
In order to comply with its tax obligations, the Company will make monthly interim payments, determining its taxable income, deducting from its income the authorized deductions, employee profit sharing and, if applicable, tax losses from prior years. A rate of thirty percent (30%) will be applied to such result, and withholdings, as well as payments made prior to the month being calculated, may be credited against the tax payable.
In addition, it is established that taxpayers taxed under RESICO must operate under the same rules that govern Title II “On Legal Entities”.
Finally, the transitory provisions of the Decree state that taxpayers taxed under the RESICO will not accrue the income effectively received in 2022, provided that they have accrued it in 2021 and with respect to investments made as of December 31, 2021, they will continue to apply the maximum deduction percentages in force until 2021.
b) Application of the regime to individuals. Individuals who carry out business or professional activities (that require a professional title for their practice) or grant the temporary use or enjoyment of goods, whose total income for the immediately preceding fiscal year for such concepts does not exceed $3’500,000.00 (Three million five hundred thousand pesos, 00/100 M.N.), may be taxed under the RESICO.
However, in case of exceeding the income limit, failing to comply with the obligations of the regime, omitting to file three (3) or more consecutive monthly returns in one (1) calendar year, or the annual return, the right to be taxed under said regime will be lost.
If the income limit is exceeded, taxpayers must pay taxes under the Business and Professional Activities Income Regime or Leasing Regime, as applicable, as of the month following the month in which the limit was exceeded, and may return to pay taxes under such regime when the income limit is again complied with.
On the other hand, it is stated that individuals cannot be taxed under RESICO if: (i) are partners, shareholders or members of legal entities or when they are related parties, (ii) are residents abroad, with one or more permanent establishments in Mexico, (iii) have income that is subject to preferential tax regimes, and (iv) receive income from fees assimilated to salaries, when paid to members of boards of directors, supervisory boards, administrators, statutory auditors, or for rendering services mainly to a service provider or for rendering independent personal services.
If income is received under the wages and salaries and interest regime, it is also possible to be taxed under RESICO, taking into account that the limit of $3’500,000.00 (Three million five hundred thousand pesos, 00/100 M.N.) cannot be exceeded by the total income received under both regimes.
The payment of the tax is made through the presentation of monthly provisional payments, to be presented by means of a declaration, no later than the seventeenth (17th) day of the month immediately following the month to which the declaration corresponds, considering only the income effectively collected, without considering the value added tax (“VAT”), or deductions.
Provisional payments will be determined considering the total amount of income effectively received, considering the rates and limitations established in the following table:
|Amount of revenues covered by tax receipts actually collected, excluding IVA (pesos per month)||Applicable rate|
|Up to 25,000.00||1.00%|
|Up to 50,000.00||1.10%|
|Up to 83,333.33||1.50%|
|Up to 208,333.33||2.00%|
|Up to 3,500,000.00||2.50%|
The annual tax return must be filed in the month of April of the year following the year to which the return corresponds, considering the total income actually received, without including VAT or applying any deduction, according to the following table:
|Amount of revenues covered by tax receipts actually received, excluding IVA (annual pesos)||Applicable rate|
|Up to 300,000.00||1.00%|
|Up to 600,000.00||1.10%|
|Up to 1,000,000.00||1.50%|
|Up to 2,500,000.00||2.00%|
|Up to 3,500,000.00||2.50%|
III. VALUE ADDED TAX LAW
1.- Zero percent (0%) rate on products destined for animal feed. The content of article 2-A, section I, paragraph b) of the LIVA was amended to specify that the application of the zero percent (0%) VAT rate also applies to the sale of products intended for animal feed and not only for human consumption.
2.- Zero percent (0%) tax on menstrual management products. A subsection j) was added to section I of Article 2-A of the LIVA to provide that the zero percent (0%) VAT rate applies to the sale of sanitary napkins, tampons and cups for menstrual management.
3.- Requirements for crediting VAT paid on importation. Article 5, section II, first paragraph of the LIVA was amended, which now stipulates that in order to be able to credit the VAT paid on the import, the customs declaration of the merchandise must be in the name of the taxpayer who intends to make the credit.
4.- Acts or activities not subject to VAT. Article 4-A was added to the IVA Law to establish as acts or activities not subject to IVA those that the taxpayer: (i) does not carry out in Mexican territory in terms of articles 10, 16 and 21 of the LIVA, and (ii) those different from those established in article 1 of the LIVA that are carried out in national territory. Such acts or activities will not be subject to VAT when they fall within the above cases.
Article 5, section V, subsections (a), (b), (c), (d) and (e) were also amended. b), c) and d), first paragraph and items 2 and 3, to clarify that when for the performance of the activities mentioned in the previous paragraph, the taxpayer obtains income or consideration for which he/she makes expenses and investments in which import IVA is transferred or paid, such tax will not be creditable.
5.- Periodicity for submitting the information by residents abroad who provide digital services to receivers located in national territory. Article 18-F, section III of the LIVA was amended to establish that the delivery of information by residents abroad that provide digital services, on the number of services or operations performed with recipients located in Mexican territory, will be on a monthly basis.
Likewise, in order to homologate the legislation, Article 18-H Bis of the LIVA was amended to provide that the corresponding penalty will be applied when the information is not provided on a monthly basis, instead of quarterly.
We hope you find this information useful. The complete publication can be found through the following link: https://www.dof.gob.mx/nota_detalle.php?codigo=5635286&fecha=12/11/2021
If you have any questions or comments, please do not hesitate to contact us.
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