The aforementioned plan includes oversight only for “employed” taxable persons
On January 29, the Tax Administration Service, [in Spanish: SAT], announced their master plan for oversight and revenue for 2023. The document reveals that this year the Tax Administration Service will focus on performing six oversight activities. However, none include activities for engaging new taxpayers, which calls for those taxpayers who have fulfilled their obligations to be even more vigilant.
The principal activities of oversight for this year will be:
- Fighting tax avoidance schemes that involve companies invoicing “simulated operations”. It should be noted that the tax authorities have the authority to reject deductions that may have been carried out with companies that invoice simulated operations [in Spanish: EFOS], for which reason we recommend continuous monitoring of your suppliers. The use of a monitoring system, such as that used in our firm, can help detect, alert, and prevent such cases.
- Review of tax avoidance schemes of companies that use “non-regulated entities” [in Spanish: “nomineras”]”. You should exercise caution when schemes are offered by any advisors which propose paying employees through third-party companies by promising certain tax benefits. It should also be noted that as of 2021, “outsourcing” is prohibited in Mexico. Only specialized services are permitted, and they must be registered in the Registry of Providers of Specialized Services and Specialized Works, [in Spanish: REPSE], in which the labor and tax authorities have announced actions that focus on identifying due compliance with requirements and the combating of falsification on the part of the employer.
- Increase in law enforcement actions and warehouses to combat smuggling. Compliance, with regard to a waybill, is among the oversight activities carried out by the Tax Administration Service, and penalties for not correctly issuing a Digital Tax Receipt, [in Spanish: CFDI], with the waybill complement, will remain in effect from August 01st, 2023.
- Analysis and programming of irregular items for income and expenses. Also known as “secondary earnings”, are acquired from activities that increase income, mainly from programs that promote compulsary collection, as well as oversight activities that are not always audits (they can be letters of invitation, notices of discrepancy according to their control systems, or an appointment with legal representatives to discuss the tax situation of the company).
Regarding this point, a “health check” is recommended in order to identify those items or operations that could draw the attention of the authorities in the event of a tax review, and to have a “defense file”, whereby all the information is compiled and documented regarding the particular situation that can help in gathering all of the evidence; such as any legal and economic issues that justify the operation.
- Strengthening of reviews for foreign trade operations, mainly for temporary imports and origin verification. During 2022, this action ensured the desired outcome for the authorities, since a real growth of 23.8% was achieved in revenue because of a review of foreign trade operations for companies. Investing in a Foreign Trade Compliance Review, (Health Check), would undoubtedly reduce the risk that is inherent in these operations by way of a detailed analysis, which is designed to detect the potential risks of each operation as well as provide solutions based on best practices.
- Publication of effective interest rate for fiscal years 2020 and 2021. These were published on January 31 and include 40 economic activities from five economic sectors: financial and insurance services, wholesale trade, retail trade, manufacturing industries, and mining.
Rates are established based on information that is available from the Tax Administration Service, [in Spanish: SAT], such as that which is obtained from yearly tax returns, tax reports, information regarding the tax situation of contributors, information returns, Internet Digital Tax Receipts (CFDI), customs declarations, among others.
The rate schedule is only intended for large taxpayers, but it doesn’t rule out the authorities from using them for hiring those taxpayers whose effective rate is lower than the published parameters. Therefore, it is recommended that an exercise be carried out in which the effective rate of the tax that corresponds to the economic activity to which it belongs be consulted and compared to its own effective Income Tax rate, with regard to each fiscal year for measuring tax risks.
It is important to consider that this master plan for oversight and revenue for 2023 contains other items and specific principles to be reviewed, such as:
- Improper application of positive tax balances.
- Refunds, 0% rate, non-purpose, and temporary imports.
- Underpricing of foreign trade operations and inappropriate use of treaties.
- Verification of compliance with VAT-Special Tax on Production and Services certifications [in Spanish: IVA-IEPS respectively].
- Pensions, payroll tax exemptions, and fictitious specialized services vendors.
- Corporate restructuring and tax purposes for spin-offs and mergers.
- Partners and stockholders (individuals involved in operations associated with restructurings).
- Incurring and applying financial losses.
- Operations with preferential tax regimes.
- Financing, capitalization of liabilities, and dividend distribution.
- Foreign payments and international restructurings.
- Trusteeship review.
- Among others.
Taking into consideration this oversight plan for 2023 by the authorities, it is imperative to be in compliance with all obligations pertaining to tax matters. That being the case, we can help you with a preventive measures and risk assessment for your company.
If you have any questions, J.A. DEL RÍO can provide you with our experts to advise you in matters concerning compliance with your legal and tax obligations. Once again, please let us know if we may be of any further assistance to you at: email@example.com.