This GT Alert provides a general overview of the recently enacted provisions of the Tax Code which will become effective as of January 1, 2014. The impact of these obligations on Mexican taxpayers’ compliance is summarized below.

Introduction

On December 9, 2013 several amendments to the Mexican Tax Code (CFF) were published on the Federal Official Gazette all of which will come into effect on January 1, 2014. These rules set out certain rights and obligations to be satisfied by Mexican taxpayers.

The CFF modifications expand certain concepts and increase the tax authorities’ audit authority as follows

• Incorporation of the “Tax Mailbox”, which will be assigned to individuals and legal entities registered with the Federal Taxpayer Registry (Registro Federal de Contribuyentes, “RFC”). The Tax Mailbox facilitates an electronic communication system among taxpayers and the tax authority whereby the latter will notify to the former any notice or administrative decision.  It also will permit taxpayers to file requests, applications and any other submission to satisfy their tax obligations.

• Inclusion of the concept of joint liability of partners/shareholders with respect to tax liability due. Such joint liability will apply to partners/shareholders that have or have had effective control of the corporation. Effective control is defined as a person’s or group of person’s ability to: 1.) impose decisions at general shareholders’ or partners’ meetings, 2.) mantain ownership of the voting rights of 50% of the capital and 3.) undertake the administration, promote the strategy or main policies of an entity through securities’ ownership, by contract or throughout any other arrangement.

• The term “accounting” is better defined and expands the systems that integrate it. It requires that a taxpayers’ accounting shall be recorded on electronic media in accordance to applicable rules.

• Internet-based digital tax billing invoices becomes mandatory and extensive to all taxpayers, including withholding agents.

• Financial statements’ accountants’ opinions (“dictámen de los estados financieros”) are elective for those taxpayers who have, in the aggregate, income in excess of 100 million pesos, the value of their assets is higher than 79 million pesos or have had more than 300 employees in the tax year.

• The tax authority’s audit mechanism is expanded to include electronic tax audits through the Tax Mailbox.

• Two mechanisms to impute taxable income are incorporated.

• The tax authorities are allowed to publish on its Internet site the name and taxpayer identification number (i.e, RFC) of those taxpayers who are considered non-compliant for tax purposes and thus, unreliable to enter into commercial transactions.

• The issuance of tax invoices is more closely monitored to reduce the likelihood of fraudulent invoices.

• In connection with tax crimes, criminal liability could be imposed as follows:

  • With respect to crimes by omission with material consequences, to persons treated as guarantors under a regulation, contract, or corporate bylaws.

  • To independent service providers who acting independently or through a third party undertake activities, operations or practices the consequence of which is a tax crime.