A Q&A guide to civil and criminal tax litigation in Mexico.
This Q&A provides a high level overview of the key practical issues in civil and criminal tax litigation, including: pre-court/pre-tribunal process, trial process, documentary evidence, witness evidence, expert evidence, closing the case in civil and criminal trials, decision, judgment or order, costs, appeals, and recent developments and proposals for reform.
To compare answers across multiple jurisdictions, visit the Tax Litigation: Country Q&A tool.
The Q&A is part of the global guide to tax litigation. For a full list of jurisdictional Q&As visit www.practicallaw.com/taxlitigation-guide.
Overview of tax litigation
Issues subject to tax litigation
What are the most common issues subject to tax litigation in your jurisdiction?
The tax court system provides a forum where taxpayers can challenge the legality of administrative resolutions issued by the tax authorities through tax litigation. The most common issues subject to tax litigation initiated by taxpayers are based on the following grounds:
The administrative resolution or law violates the Mexican Constitution. The tax authority that issued the administrative resolution or law had no legal basis for issuing it. Incorrect interpretation or application of tax provisions. Missing the exhibition of all the proper evidence during the audit process to challenge the tax authorities' conclusions. Rejection of the methodology, comparable companies and adjustments used by taxpayers for the transfer pricing analysis. A new ruling issued by Mexico's Supreme Court provides that if a taxpayer fails to submit in a timely manner the information and documentation requested by the tax authorities during an audit, the taxpayer cannot then later file that information and documentation as evidence in a subsequent court action for annulment.
A taxpayer can either file a complaint in writing to the Federal Tax Court, or submit an online application through the Online Justice System.
Outline the legislative framework and principal pieces of legislation governing both civil and criminal tax litigation.
Civil tax litigation
Mexico follows a Civil Code system. In Mexico, like other countries which are influenced by the European judicial system (that is, the Roman system), the judicial process is based on the existing laws and court precedents issued by judges.
The power to impose taxes in Mexico rests primarily with the federal government. The Constitution grants exclusive powers to the Congress to levy taxes on the following matters:
Domestic and foreign trade. The development and exploitation of natural resources. All commercial and industrial activities, including those of financial institutions and insurance companies. Certain public services. Several products (such as tobacco, petroleum, and products derived from petroleum). The states also have tax levying powers but they are restricted by the Constitution from levying taxes in areas exclusively reserved for the Congress.
There are many tax agreements entered between the states and the Congress for avoiding double taxation at both federal and state level. Under those agreements, tax revenues collected by the federal government are allocated and transferred to the states in cases where their powers to levy taxes have been limited.
The most important laws and regulations governing the Mexican tax system are as follows:
Constitution. Federal Fiscal Code (FFC) and its Regulations. Income Tax Law (ITL) and its Regulations. Value Added Tax Law (VATL) and its Regulations. Special Production and Services Tax Law (SPSTL). Federal Taxpayers' Rights Law. Omnibus Tax Regulations. Tax authority standards (non-binding tax criteria) and jurisprudence. In addition, Mexico has entered several Conventions for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with other jurisdictions with respect to taxes on income.