The two houses of the Mexican Congress (the Chamber of Deputies and the Senate) last week passed a tax reform measure which now awaits President Enrique Peña Nieto's signature. The legislation is significantly different than the President's controversial tax overhaul proposal forwarded to Congress on September 8. If signed by the President, as expected, the new tax rules will be effective on January 1, 2014, except as noted below.
The tax reform measure is very similar to the reform measure passed by the Chamber of Deputies and forwarded to the Senate on October 17, which was the subject of a Jones Day Alert dated October 18. Set forth below is a summary of the significant changes included in the reform package as well as a description of material proposals by the executive branch which were rejected or modified by Congress.
Federal Tax Code
New "tax mailbox" process. A new procedure will be established, known as the "tax mailbox", to facilitate and expedite communications between the tax authorities and taxpayers and to allow electronic reviews and tax audits. According to the transitory provisions, the tax mailbox will be available for legal entities on June 30, 2014 and for individuals on January 1, 2015.
Tax reports (dictámenes fiscales). Under current law, companies are obligated to file tax reports prepared by their external auditors, which gives them the benefit of not being audited by the tax authorities until the external auditor is questioned about the tax report. Congress modified the rule to give some companies the option to choose whether or not to file such tax reports, with the continued benefit to delay tax audits. This is more advantageous than the rejected executive proposal, which would have eliminated the opportunity to file such tax reports.
Joint liability for partners and shareholders. Each partner and shareholder having control in the decision making of a Mexican legal entity will be jointly responsible for unpaid taxes and will be required to post a bond or otherwise guarantee tax credits under litigation, according to their percentage share ownership in the legal entity. This new rule is less restrictive than the executive proposal to impose strict liability on all shareholders for the tax liabilities of their legal entities.
Reduced period to challenge tax credits in an administrative appeal. The term to file an administrative appeal to challenge tax credits was reduced from 45 business days to 30 business days. This is less restrictive than the executive proposed 15 business day term. Taxpayers remain entitled to alternatively challenge tax credit...