Authorized Non-profits play an essential role in society, however, due to the nature of their operations they have always been a focus of attention for the authorities specialized in Tax Law in Mexico, who continue to promote modifications to the regulations according to the constant changes in the environment, for these taxpayers to carry out their operations in a transparent manner, pursuing the end for which they were constituted.
Therefore, on September 8, 2021, the Federal Public Administration presented the draft of a Decree reforming, adding, and repealing various articles of the Income Tax Law (LISR), the Value Added Tax Law (LIVA) and the Fiscal Code of the Federation (CFF), among others.
In this decree, various modifications to the current legal framework are proposed, which could be applicable to non-profit legal entities authorized to receive deductible donations, which are listed below.:
1. Donations will be recognized as Personal deductions: Regarding the donations granted by individuals to the authorized non-profits under the terms of the LISR, it is proposed to amend Article 151 with the purpose of eliminating the exception contained in its last paragraph, so that the donations granted, and complementary retirement and voluntary contributions are also subject to the global limit for personal deductions established in the last paragraph referred to above.
In other words, the disbursements made for the aforementioned concepts would be included in the limit established by law for personal deductions, which may not exceed the amount resulting from the lesser of 5 Units of Measurement and Update (UMA) per year ($163,556.50), or 15% of the total income of the taxpayer for the fiscal year. Below is an example of a comparative case between the current regulations and the proposed initiative for 2022:
Analyzing the comparison between both assumptions, we can conclude that this modification would have a negative impact to taxpayers, since it would generate a limitation for individuals who wish to make donations, since it could increase their taxable base for calculating the corresponding income tax.
2. Canceled CFDIs: Those who cancel CFDIs outside the term established in the tax provisions will be subject to a fine from 5% to 10% of the value of the cancelled receipt. In addition, a new fine from $400.00 to $600.00 is proposed for issuing a CFDI without the corresponding complement (donation complement). Besides to this fine, if the CFDI that covers the donation does not have such complement, the donor will not be able to make the donation deductible under the terms of the Income Tax Law.
3. When there is a discrepancy between the description of the goods, merchandise, service or use or benefit indicated in the CFDI and the economic activity registered by the taxpayer, the tax authority will update the economic activities and obligations of such taxpayer to the corresponding tax regime. In this way, the non-profits that carry out such act could cease to be taxed as non-taxpayers of Income Tax (Title III) and become taxpayers of such tax (Title II), the tax authority could exercise its power to carry out the corresponding updates.
4. Regarding Value Added Tax (VAT): It is proposed to amend Article 2a, where it is clarified that the 0% rate applies both to products intended for human and animal feed. As a result of the above, the non-profits of welfare purposes, social development and/or reproduction of endangered species whose costs include the purchase of animal food will no longer be paying 16% VAT on such food, thus creating savings for the aforementioned associations (such savings will be subject to the fact that the companies that produce and sell such products reduce their sales price).
5. New presumption of the non-existence of operations. This means that the non-existence of the transactions covered by the tax receipts will be presumed when the tax authority detects that a taxpayer has been issuing receipts that support transactions carried out by another taxpayer during the period in which the latter’s use of the digital seal certificates has been suspended or temporarily restricted, without having corrected the irregularities detected by the tax authority, or issuing receipts that support transactions carried out with the assets, personnel, infrastructure or material capacity of such person.
Therefore, it becomes transcendental for the authorities to make it easier for non-profit associations to voluntarily comply with their obligations through simplified and easy-to-understand tax reforms, thereby facilitating compliance by the legal entities in question and enabling them to maintain their authorization as an Authorized Non-profit in force without the risk of revocation.
-José Eduardo Carbajal Valdés
-Claudia Lizzeth Encarnación González
Published on October 12, 2021
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