On September 10, 2019, the Senate approved a report that amends and increases several provisions of the Federal Act Against Organized Crime, for the National Security Act, the National Penal Procedures Code, the Federal Tax Code and the Federal Penal Code.
The amendment to aforesaid laws corresponds to activities deemed a threat to national security, such as:
- Smuggling and comparable
- Tax fraud and comparable
- Issuance, sale, purchase or acquisition of tax receipts containing non-existing, false activities or simulated legal activities.
The inclusion of these crimes into the catalog causes preventive imprisonment, as these are qualified as organized crime due to the commission of unlawful acts against the federal tax authority, when three or more persons organize to commit these in a permanent or repeated manner.
Federal Tax Code
In tax matters, section III of article 113 is repealed and article 113-Bis of the Federal Tax Code is amended, specifying sanctions, sums, range and circumstances to be imposed.
In addition, other relevant amendments are added, such as:
- The date of application of these reforms, which shall be January 1, 2020
- The power upon authorities to issue judgment against those committing crimes before these reforms begin to produce effect.
- Increase in imprisonment from 5 to 8 years.
This reform approved by Senate is relevant in tax matters due to qualification given to tax fraud and comparable tax fraud, with a severity similar to crimes such as smuggling, drug dealing, people trafficking or terrorism. It is a crime that calls for mandatory preventive imprisonment when the fraud amount exceeds the sum of 7.8 million pesos.
The purpose of these measures is to eradicate bad practices consisting on incorporating and managing “ghost companies”, and imprisonment shall apply to the person that on its own, or through another performs illegal behaviors for the issuance, sale, purchase or acquisition of tax receipts bearing non-existing, false transactions or simulated legal actions; that is EFOS (companies invoicing simulated transactions) and EDOS (companies deducing simulated transactions). In addition, the person allowing or publishing under any means, activities in connection with aforesaid activities shall be sanctioned with the same punishment. When the crime is committed by a public servant in exercise of his/her duties, this person shall be removed from employment and banned from holding public office one to ten years, in addition to imprisonment.
It is important to mention that tax authorities have mentioned on several occasions that although tax receipts issued by these entities or individuals include formal elements and authorized by the electronic invoicing systems of the Tax Administration Service, they are deemed false as they lack economic substance and material nature of the transaction they support; that is, there are no assets, personnel, infrastructure or material capacity, whether direct or indirect, to render services or produce, market or deliver goods.
The report containing amendments to aforesaid Laws was sent to Congress for modification or approval thereof.
Due to the above, it will be important to monitor the corresponding resolutions to be discussed, modified and approved by Congress, in order to have certainty as to changes considered for the purposes of these tax provisions.
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