2021 FISCAL REFORM
On December 8th, 2020, the Decree reforming, adding, or abrogating certain provisions of the Income Tax Law (ITL), Value Added Tax Law (VATL) and the Federation Fiscal Code (FFC) were published in the Official Journal of the Federation.
The main objective of the tax reform is to expand the rights of the tax authorities, including new control measures related to the business reason, cancellation of digital stamp certificates, joint liability, term to keep the accounting, etc., and no new contributions or increase in current tax rates were applied.
Among the most relevant points are the following:
Income Tax Law
- Non-profit Organizations (Authorized grantees)
From July 1st, 2021, new activities of companies or civil associations must be authorized to receive donations and thus may be taxed as non-profit corporations (Title III of the ITL).
- Scientific or technological research registered in the National Registry of Scientific and Technological Institutions.
- That they grant scholarships referred to in article 83 of the ITL.
- Research or preservation of wild, terrestrial, or aquatic flora or fauna, within the defined geographical areas.
- Prevention and control of water, air and soil pollution, protection of the environment and the preservation and restoration of ecological balance.
- That they dedicate themselves exclusively to the reproduction of species in protection and danger of extinction and to the conservation of their habitat.
Not having the authorization from the Mexican Tax Authorities (SAT) at that time, they shall be taxed under the Title II of the Income Tax Law, thus they could be found in two regimes during the same fiscal year.
Likewise, they must determine the distributable remnant generated as of December 31, 2020 in the terms of Title III of the ITL in force on that date, and their partners and members will accumulate the remnant that the legal entities deliver to them in cash or goods.
- Distributable remnant
The possibility of not having the Digital Tax Receipt (CFDI) is eliminated, since expenditures that are not deductible for this reason must be considered as distributable remnant and 35% of income tax must be covered on this amount.
- Loss of authorization as grantee
If more than 50% of the income comes from activities other than the purposes for which the grantees were authorized, they will lose this approval. In this case, they will have a period of 12 months to recover such authorization. If this is not recovered within that period, they must allocate all their assets to another grantee or, stop paying taxes under the regime of Title III of the ITL.
- Main grounds for revocation to be an authorized grantee
Article 82-Quáter of the ITL is added, which specifies the reasons for revocation of said authorization in its section A, such as:
- Allocate its assets for purposes other than the authorized corporate purpose.
- Not issuing the tax receipt that covers the donations received or issuing them as such, even when the operation was not a donation.
- When the authority identifies the breach of its obligations when exercising its powers of verification.
- If it appears in the lists related to article 69-B of the FFC (companies that invoice simulated operations or “EFOS”).
- If the legal representative, partner, associate, or any member of the Board of Directors or Administration forms or was part of another entity whose authorization as grantee had been revoked in the last 5 years.
If the authority intends to revoke the authorization provided to such grantees, it must follow the procedure described in section B of the article mentioned, so the taxpayers should be aware of any notifications they receive, because they will have 10 days following the one in which the notification takes effect to provide the documentation that undermines this act of authority.
- Income assimilated to salaries
Individuals who choose to pay taxes as assimilated to salaries derived from their income from preponderant fees, fees, or business activities, should not exceed $ 75 million pesos in the year (individually or as a whole). Otherwise, they must be taxed according to the specific regime that corresponds to them from the month following the one in which they exceed said limit and they must notify the people who make the payments in writing.
- Income from the sale of goods or provision of services through technological platforms
The tables established in article 113-A of the ITL are eliminated and unique withholding rates are established for individuals who obtain income through digital platforms, in accordance with the following:
- Ground passenger transport and goods delivery services 2.1% .
- Lodging services 4%.
- Disposal of goods and provision of services 1%.
The SAT may sanction by a temporary blockade those legal entities residing abroad who operate the digital platforms, in case they fail to retain and find out the income tax for 3 consecutive months.
Value Added Tax Law
- Professional medical services
It is incorporated as VAT-exempt services, medical services provided by natural persons, individually or through civil companies or authorized private assistance or charitable institutions.
- Foreign tax residents without permanent establishment in Mexico providing digital services
Foreign tax residents without permanent establishment in Mexico who provide digital services are exempted to file information to the SAT, only if intermediaries withhold VAT in full.
- Temporary blockade of digital services
SAT may temporarily block access to digital services, where foreign tax residents without permanent establishment in Mexico do not comply with their tax obligations (obtain the Mexican taxpayer ID number or “RFC”, name a legal representative, indicate a tax domicile, etc.) by publishing them on lists on the SAT website to avoid their contracting. It is important to consider that SAT will report such irregularities, for which the taxpayer will have 15 days to answer and provide the appropriate information.
A penalty shall also apply if payment of the tax or withholdings, as well as the filing of informative returns, for three consecutive months or for two consecutive quarterly periods, resulting in the cancellation of the RFC and the cancellation of the list of authorized by the SAT for the provision of digital services to recipients in Mexico.
- Option to intermediation digital platforms
The option to this type of platform is integrated into the VATL itself, to publish the price of goods and services without including VAT expressly and separately, indicating the legend “VAT included”.
Federation Fiscal Code
- Business reason (Anti-abuse clause)
It is specified in Article 5°A of the FFC that the term “business reason” shall apply irrespective of the laws governing the economic benefit expected by the taxpayer. This clarifies that the authorities’ action will be in tax matters, without prejudice to the criminal liability that may arise from committing a crime of those criminalized as such in the FFC.
- Alienation in split up of entities
In the case of the breakup of companies, it is considered that there is a transfer of property when an amount is generated in the split company that was not registered or recognized at the time of approving the split agreement, at the shareholders’ assembly.
- Cancellation of digital stamp certificates
Two assumptions of cancellation of digital stamp certificates are added:
- Where the SAT detects that the companies that invoice simulated operations (EFOS) mentioned in the lists of article 69-B are definitively in that situation as they have not received any distortion from said taxpayers.
- In the case of taxpayers who did disprove the presumption of improperly transmitting tax losses and, therefore, are on the list of alleged in article 69-B Bis.
The period of three to ten days is modified, so that the authority issues resolution in cases where taxpayers follow up on the procedure to correct detected irregularities.
In the case of taxpayers to which the use of certificates has been restricted, a period of 40 days is granted to submit a request for clarification and disprove the reasons for the cancellation of the stamps, if such clarification has not been made within the established period, the authorities will proceed to leave those certificates without effect.
- Tax mailbox and messages of interest
It is specified that the tax mailbox schedule will be governed by the Central Mexico Zone.
The SAT may send taxpayers any message of interest it deems through the tax mailbox, which may contain any administrative act or resolution.
Individuals and legal entities that have been assigned a tax mailbox must consult it within the three days following the one in which they receive an electronic notice from the SAT to any of the communication mechanisms. The authority will send for a single occasion, through the chosen mechanisms, a confirmation notice that will serve to corroborate the authenticity and correct operation of it.
It establishes the obligation to maintain a single email and only one telephone number as means of contact.
- Tax refund claiming
In the cases in which a refund request is presented and the taxpayer’s tax address is not located, said request will be considered as not filed.
If the authority detects that there are several refund requests from the same taxpayer regarding the same contribution, the authority may exercise powers of verification for each one or all of the applications made and issue a single resolution, which must be notified to the taxpayer in a period of no more than 20 business days after the end of the review period.
- Joint responsibility
Joint liability is established for residents in Mexico who carry out operations with related parties residing abroad, when derived from said operations it is detected that foreign related parties can be considered as permanent establishments in Mexico and consequently, they must pay taxes in our country for such transactions.
In the event of a division of companies, partners or shareholders will be jointly and severally liable, without limitation, when, because of said division, concepts, assets or items that did not exist before in the companies are generated (splitter, spun-off or splits in question).
In this case, the split will be deemed to be alienation and will not be exempt for tax purposes.
They will also be jointly and severally liable when they are on the SAT lists as definitive for having improperly transmitted tax losses.
- Notice of partners, shareholders, associates, and other individuals
Section VI of article 27, part B, is amended to oblige to provide the information of the name and RFC of partners, shareholders, associates, and other people, whatever the name by which they are designated, who by their nature are part of the organic structure and that they have said character in accordance with the bylaws, each time that any modification or incorporation is made related to them.
- Cancellation notice in the Mexican taxpayers’ database (RFC)
In order to obtain the cancellation of the RFC in case of a liquidation, cease entire transactions or by merger of companies, taxpayers must prove among other requirements, the following:
- Not be subject to the exercise of powers of verification of the authority, nor have tax credits in charge.
- Not to be found on the lists published by SAT as EFOS, presumed and not located.
- That what is stated in the monthly or annual tax returns are consistent with what is stated in the CFDIs and other documentation that the authority has.
- Preserving accounting
The period for retaining accounting is extended for as long as the entity remains and not only for 5 years, in the following cases:
- In the case of corporate documentation (corporate books, assembly minutes) containing increases or decreases in share capital, as well as the distribution of dividends or profits, considering the bank account statements issued about this situation.
- In the event of capital increases valuation, where they have been in kind or in the event of a surplus (derived from the revaluation of fixed assets).
- Documentation that includes, among others, the financing granted and received, as well as the movements generated by corporate restructurings, or the movements that integrate the CUCA, CUFIN.
- All documentation that cosign the origin of tax losses for as long as the legal entity survives.
- Taxpayer assistance
The authorities may make periodical publications of specific parameters of reference on profit, authorized deductions, effective tax rates including profit margins, according to certain economic sectors or industry, to promote voluntary compliance by taxpayers.
- Precautionary assurance to third parties
The figure of a related third party is added in article 40, in which the precautionary insurance of assets (starting with bank deposits) of taxpayers, jointly responsible or third parties related to them, is established as a constraint measure, when they prevent any form or by any means the initiation or development of powers of verification of the authorities.
- Matters related to home visits
If there is a refusal to sign or receive the minutes by the visitor, witnesses, or who has attended the diligence carried out by the authority, this will be settled in the respective minutes without losing validity. This scenario extends to reviews for verification of compliance with electronic obligations and reviews.
The visitors are empowered to review the documentation or reports obtained from third parties and those provided by the taxpayer himself during the home visit.
- Tax opinion
In the cases in which the authority exercises powers of verification and reviews the opinions formulated by certified public accountant, it is added in article 52-A that he must appear before the fiscal authority to make the clarifications requested in that act and said review will be carried out exclusively with the public accountant who has formulated the opinion, without the legal representation being appropriate. Likewise, they must present the working papers prepared for the audit carried out.
The order established in said article, section III, shall not be followed when the object of the verification acts is on contributions or benefits in foreign trade matters; including the uses derived from the authorization or concession granted for the provision of management, storage, and custody services of foreign trade of goods.
- Improper transmission of tax losses
In cases where the authority presumes that the right to reduce tax losses was improperly transmitted, pursuant to article 69-B Bis, the assumption is added that the deductions whose consideration is protected by the subscription of credit securities or any other legal figure.
In this case, the tax authority shall notify the taxpayer that he obtained the tax loss through his tax mailbox, so that within a period of twenty days he may provide the documentation and information it deems relevant to undermine the facts that led the authority to notify him.
Taxpayers may request through the tax mailbox, on a single occasion, an extension of ten days to the period provided for giving the information and documentation, as long as the request for an extension is made within the initial period of twenty days.
- Conclusive agreements
A term is established to promote the conclusive agreement of 20 days after the notice of observations, final act, or provisional resolution (electronic reviews) was notified and provided that the authority has qualified the facts or omissions.
The conclusive agreement will not proceed in the case of refunds of balances in favor or payment of the undue, compulsory to third parties of the execution of judgments or resolutions, or in the case of taxpayers of 69-B of the FFC (EFOS).
Against the conclusive agreement reached between individuals and authorities, no dispute resolution procedure provided for in an international treaty will proceed to avoid double taxation signed by Mexico.
Non-compliance with transfer pricing obligations is added as aggravating factor, thus the 50% of reduction in fines applicable is eliminated.
Likewise, it changes the payment period from 45 days to 30 days following the one in which the notification of the fine takes effect, so that it can be reduced by 20%.
A penalty of $500,000 to $1,000,000 pesos is added to non-compliant dealers, within a maximum period of five days, with the order to block access to the digital service of the provider of those services referred to in the second paragraph of Article 18-H QUÁTER, second paragraph of the VATL, as well as to the abovementioned dealers who do not carry out the unlocking within the period referred to in the second paragraph of article 18-H QUINTUS of that law. This penalty will also be imposed for each calendar month that passes without complying with those orders.