On September 8th, 2021, through the Ministry of Finance and Public Credit, the Federal Executive presented to the Congress of the Union the proposed economic package for the Fiscal Year 2022, which is submitted for consideration by the Chamber of Deputies review and approval.
Said proposal involves reforms, additions, and derogations to multiple provisions, highlighting the Federal Tax Code, the Income Tax Law, the Value Added Tax Law, and the Special Tax on Production and Services Law.
The document states that the proposal is based on trust in citizens. Its main objectives are administrative simplification and the reinforcement of legal certainty to achieve a more efficient and equitable tax system, which reduces tax elusion and evasion.
From the above, the following issues considered in said initial proposal stand out:
Federal Tax Code.
- Taxed mergers and spin-offs. The authority may determine a lack of business reason and thus, consider the restructuring as taxable disposal.
- Digital Seal Certification Restrictions. Assumptions are added so that the authority obtains the precautionary power to cancel or restrict them when detecting irregularities.
- Compensation for correction. Even in different contributions, taxpayers may correct their tax situation with balances in favor or undue payments that they have in force.
- Mandatory Tax Opinion. The obligation to have a certified public accountant’s opinion on the financial statements under certain assumptions is reinstated.
- Conclusive agreements. Twelve-month deadline after going to PRODECON.
Income Tax Law.
- Exchange gain. The exchange gain may not be less than that determined using the exchange rates published in the corresponding Official Federal Gazette.
- Accreditation order. Accreditation priority is established, starting with the provisional payments made during the fiscal year and then the tax paid abroad.
- Supported credits. New assumption for operations without a business reason.
- Business reason for restructuring. It seeks to have a business reason to receive tax benefits for corporate restructuring (sale and deferral).
- Bad credit deduction. It can only be taken after having exhausted all available collection procedures and legal procedures; the taxpayer must obtain a final resolution issued by the competent authority, showing that the collection procedures have been exhausted or that the execution of a favorable resolution was impossible.
- Thin capitalization. When determining stockholders’ equity via tax attributes, tax losses should also be considered. Additionally, SOFOMES will be subject to this when its operations are predominantly with related parties.
- Original amount on investments. New cumulative concepts are added (emplacement, assembly, handling, delivery, operation, among others).
- Alienation of shares of residents abroad. When a foreign shareholder of a Mexican legal entity alienates a new foreign shareholder, the Mexican issuer must report no later than the month following the transaction.
- CUFIN. It is specified that the PTU should not be subtracted in the UFIN calculation.
- Mandatory safe habor for maquiladoras. Compliance with transfer pricing principles cannot be demonstrated through Advance Pricing Agreements
- Withholding for interest payments abroad. Assumptions for withholding 4.9% and 10% with operations with related parties abroad are limited.
- Foreigners’ legal representation. General rules will be established with the minimum requirements for the representative to demonstrate sufficient assets for said work.
- Trust regime. New tax system for individuals and legal entities based on cash flow with tax rates by generated income level.
- Individuals: Those who carry out business, professional, or leasing activities with income of up to 3.5 million pesos per year. They will be subject to withholding by legal entities. RIF and AGAPES taxpayers are incorporated upon repealing these regimes.
- Legal entities: Income of up to 35 million pesos a year with partners who are natural persons. Upon its repeal, the Taxpayers in the Income Accumulation for Legal Entities Option Regime will be incorporated.
Value Added Tax Law.
- Non-object activities. Taxpayers who carry them out will not be able to credit the tax paid when linked to actions of this nature.
- Accreditation of import VAT. A request must be made in the taxpayer’s name for merchandise, reflecting the corresponding VAT payment.
- For the IEPS law purposes, the label concept includes the electronic version thereof.
- There are no changes in tax incentives of the Federal Income Law.
- The income tax withholding rate for interest from the financial system decreases to 0.08% (from a rate of 0.97% in 2021).
Lastly, the reform initiative must be approved no later than October 31st.