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Status of constitutional appeal against electronic record uploading in Mexico

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On November 26 2014, the Mexican Supreme Court ruled, through a contradiction, that taxpayers should be granted a suspension for the obligation to upload their accounting records electronically until the constitutional appeal (amparo) against such obligation is decided.

This means that those taxpayers that filed an amparo against the obligation will not have to upload any information until the appeal is decided at all its stages (which may take about 2 years).

Background

As commented on in prior articles, as part of 2014 Mexican Tax Reform, the Federal Tax Code requires taxpayers (corporations and individuals) to file their accounting records electronically.

Recently, there has been important news related with this new obligation.

On December 9 2013, the Mexican tax authorities published in the Federal Official Gazette the reform to article 28 of the Federal Tax Code.

This reform included a new concept of “accounting for tax purposes” which, in some cases, goes beyond Generally Accepted Accounting Principles (GAAP), jointly with a number of new requirements that accounting records must comply with for fiscal purposes.

These amendments are part of a new audit structure developed by the tax authorities focused on electronic means and a new faculty to trigger audit procedures electronically (“online audits”).

The advantage for the tax authorities of this kind of audit will be shorter periods for the audit process (a traditional audit procedure takes around 2 years plus another 2 years, if the case becomes the subject of litigation).

In the case of this new model the total time is 55 working days plus the litigation period, if that arises.

To align with this strategy, the electronic accounting records that supposedly would be uploaded as from January 2015 will be the most important information source for the tax authorities.

The information to be uploaded is the:

  • chart of accounts;

  • trial balance (monthly and annually), and

  • journal entries (only under request by the tax authorities)

The deadline to upload this information has suffered several delays. Originally, the first delivery was established for October 2014; then the tax authorities granted an extension to January 2015, the month in which the whole second semester of 2015 should have to be reported.

Recently, the Mexican Congress issued the Federal Revenue Law for 2015, including a provision that states that electronic accounting filing obligations will be in force from 2015.

Apparently, this provision may eliminate the obligation to upload the accounting records for 2014 (July-December) in January 2015. However, the wording is not totally clear and it is expected that rules clarifying this position will be issued very soon.

If this is confirmed, taxpayers would be obligated to upload their accounting records electronically from January 2015 during February 2015.

This would represent a real challenge for the Mexican tax authorities, taking into account that these taxpayers will not provide any information for a long period of time. This has to be associated with the fact that the annual tax report that taxpayers used to deliver on annual basis is no longer mandatory.

It is easy to conclude that this controversial topic will provide a lot to discuss in the near future.

Gustavo Gómez (gustavo.gomez@mx.ey.com), Tax partner, EY Mexico

Humberto Cruz (Humberto.cruz@mx.ey.com), Tax Senior Manager, EY Mexico,

The principal Mexican correspondents of the Compliance Management channel on www.internationaltaxreview.com

EY’s other tax compliance partners in Mexico City are:

Hector Armando Gama Baca (hector.gama@mx.ey.com)

Fernando Tiburcio Lara (fernando.tiburcio@mx.ey.com)

Juan Manuel Puebla Domínguez (juan-manuel.puebla@mx.ey.com)

Raúl Tagle Cázares (raul.tagle@mx.ey.com)

Raúl Federico Aguilar Millán (federico.aguilar@mx.ey.com)

Ricardo Delgado Acuña (ricardo.delgado@mx.ey.com)

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