Mexico has a history of being a very complex country for compliance due to accounting and legal regulations.
In fact, it was ranked by the Financial Complexity Index 2018 as the ninth most complex in the world. A new regulation called the Federal Revenue Law 2019 came into effect on 1 January 2019, which has new changes that businesses must be aware of to be fully compliant.
There are five changes which will have an impact on companies:
Universal tax offset
Under the old system, when there was a favourable balance from any of the taxes, the taxpayer could apply the balance to pay other taxes. The modification in the Federal Revenue Law, Article 25, section VI, stated that universal compensation is eliminated and the favourable balances can only be offset against the same tax, as a credit against upcoming months or as a refund, which can take up to six months.
The main impact of this change will be cash flow. If a favourable balance is an asset, it is not immediately reflected in the cash flow, because the company will have to cover tax obligations. Companies can plan ahead by having the withholding payments funds which are made to suppliers and employees. This would allow for a positive cash flow when paying contributions.
The Tax Administration Service (SAT) recognized that there is an increased number of taxpayers performing vulnerable activities and they are not in compliance with obligations stated in the anti-money laundering laws. A new self-regularization programme allows for all companies that fail to comply with their AML obligations between 1 July 2013 and 31 December 2018 the option to self-correct and avoid administrative penalties. One caveat to this is that they are up to date with their obligations for 2019 and have a previous authorization from SAT to apply to this programme.
SAT expects that taxpayers will provide the required information on a monthly basis and that each company has policies to check the risk levels within their vulnerable activities.
Multiple Informative Return (DIM)
Since the implementation of the Digital Tax Receipt (CFDI), the workload needed to present returns has been reduced. There is no need to present different annexes. Currently, Annex 4 is required and applies to the financing of residents abroad. Annex 9 is applicable for operations with related parties and Annex 10 is applicable for trust operations.
The main change in the law is related to Annex 9. Besides the...