This past September 8, the Federal Executive submitted to the Congress of the Union the economic package for the 2021 fiscal year ("PEF 2021"). It contemplates, among others, the bill for the Federation Revenue Law for the 2021 Fiscal Year, as well as the bill with a draft Decree ("Decree") amending, adding, and repealing various provisions of the Income Tax Law ("ISR"), the Value Added Tax Law ("IVA"), the Special Tax
The modifications provided for in the Decree are primarily designed to adjust certain procedures set forth in the tax provisions in force (such as the refund of favorable balances, the administrative enforcement procedure, among others), to modify those provisions applicable to the exercise of the tax authorities' auditing powers, and those related to the invoicing of nonexistent transactions, tax evasion, and tax simulation. It should be noted that the PEF 2021 does not contemplate substantial changes to the tax provisions or the creation of new taxes. Below you will find a general summary of the topics that we consider relevant from the proposed amendments, which the Congress of the Union will discuss and, where applicable, approve in the coming months. It must be taken into account that the PEF 2021 may undergo substantial modifications during the legislative process. 1. Income Tax Law (ISR): Among other modifications, the legal framework applicable to entities authorized to receive deductible donations is amended in order to combat certain improper practices identified by the tax authorities. It is clarified that maquiladoras may comply with their transfer pricing obligations solely by obtaining and retaining the Advance Pricing Agreement or by means of the safe harbor method contemplated in said law. 2. Value Added Tax Law (IVA): The Federal Executive's proposal focuses on amending certain provisions applicable to platforms that provide digital services, which entered into force this past June 1. This is done by adjusting the tax withholding mechanism and transferring certain formal obligations (to the platforms that provide digital intermediation services) that corresponded to providers residing abroad without a permanent establishment in Mexico. Likewise, it is proposed to establish a control mechanism so that, when digital service providers residing abroad without an establishment in Mexico incur serious tax omissions (i.e., failing to register with the Federal Taxpayers Registry, among others), the blocking of internet access to their services may be carried out by means of an order issued by the Tax Administration Service ("SAT") to the corresponding public telecommunications network concessionaires in Mexico. 3. Special Tax on Production and Services Law (IEPS): With respect to IEPS, it is contemplated to incorporate a scheme of complementary rates in addition to those already provided for the disposal and importation of automotive fuels (gasoline, diesel, non-fossil fuels, or their blend). 4. Federal Tax Code (CFF): Among the main changes to the CFF, it is proposed to modify the anti-abuse rule provided for in said ordinance, by means of which the tax authorities may recharacterize the legal effects of taxpayers' acts in which a tax benefit is sought, in order to distinguish its scope for tax and criminal purposes. With respect to the spin-off of companies, the requirements that must be met so that it is not considered a disposal of goods are expanded. Furthermore, it is proposed to render ineffective the digital seal certificates of Companies that Invoice Simulated Transactions ("EFOS") and of those taxpayers who improperly transferred tax losses, so that the measure is applied immediately without their being entitled to the temporary restriction thereof. With respect to refunds of favorable balances, the failure to locate the taxpayer or its domicile is established as grounds for deeming the refund request abandoned. For its part, with respect to joint and several liability, a new scenario is included applicable to residents in Mexico that maintain transactions with related parties residing abroad when the latter constitute a permanent establishment in Mexico. On the other hand, certain modifications are proposed for the retention of taxpayers' accounting records, such as the extension of the term when it concerns information and documentation necessary to implement the agreements reached as a result of the dispute resolution procedures contained in treaties to avoid double taxation. With respect to conclusive agreements, it is proposed to limit their filing when the resolution determining the tax credit is already in the process of being notified, among other circumstances. We will remain attentive to the legislative process of the PEF 2021 and to any relevant change it may undergo in order to update this document. This document is valid as of the date of its issuance, and its purpose is merely informative and not interpretive with respect to the information it contains. It is not an opinion and therefore should not be considered as advice applicable to particular cases under any circumstances. Should you require professional advice regarding the topics included in the document, we would appreciate your contacting us directly. For additional information, contact our experts: Fernando Moreno, Partner: +52 (55) 5258 1008 | fmoreno@vwys.com.mx Jorge Díaz, Associate: +52 (55) 5258 1008 | jdiaz@vwys.com.mx Diego Benítez, Associate: +52 (55) 5258 1008 | dbenitez@vwys.com.mx
