On December 17 2012, the Mexican Congress approved the economic package (Bill) for fiscal year 2013 which includes a TAP applicable under certain circumstances.
It will enable taxpayers to settle tax liabilities as well as surcharges and penalties generated before December 31 2012. Besides the TAP, on February 19 2013 the Mexican tax authorities published the miscellaneous rules detailing the requirements for the application of the TAP.
Tax amnesty programme
The TAP allows significant reductions for taxpayers with debts to the Mexican Tax Administration Service (SAT), due to noncompliance.
Among the items to be pardoned are omissions or errors relating to federal tax payments, compensatory duties, inflationary adjustments, surcharges and penalties, including those derived from breaching federal tax obligations other than tax payments.
The programme seeks to reach agreement with all defaulting taxpayers.
TAP is available in cases where the taxpayer contested or challenged a tax assessment derived from an audit, either before the SAT through an administrative appeal, or before the Tax Court through a nullity petition. TAP is also applicable in cases of self correction, with no audit performed by SAT.
Taxpayers must withdraw the legal means of defence to claim under the TAP.
Reductions
The reduction or remission will depend on the fiscal year concerned.
For federal tax liabilities, compensatory duties and penalties for breaching federal tax obligations other than tax payments that originated before January 1 2007, the benefit will be as follows:
· An 80% forgiveness of the tax liability and compensatory duties, taking into account inflation. Reduction will be 100% where the taxpayer was audited for years 2009, 2010 and 2011, and was not found guilty or had self-corrected;
· A 100% forgiveness for surcharges and penalties; and
· A 100% forgiveness of penalties for breaching federal tax obligations other than tax payments.
For surcharges and penalties resulting from tax liabilities, compensatory duties and federal contributions, excluding withheld taxes or collected taxes such as VAT, originated between January 1 2007 and December 31 2012, the benefit will be as follows:
· 100% forgiveness of surcharges and penalties arising from such tax liabilities; and
· 100% forgiveness of penalties for breaching of federal tax obligations other than payment.
The TAP is also available for penalties generated in 2013 as long as the relevant tax is paid within 30 days of the notification.
To enjoy this benefit, the non-remitted tax credit must be paid in one instalment; it is not possible to pay in smaller instalments.
Applicable regulations
The SAT’s miscellaneous rules outline the requirements necessary to apply the TAP. In general terms, the rules provide the following:
· Submit an online application of the remission no later than May 31 2013 via the SAT webpage. This will be filed and credited with the electronic signature (FIEL);
· Subsequently, the software application will display the tax liabilities that the taxpayer owns, when the taxpayer was audited and assessed;
· In cases where the debt does not appear, the online application has the option to self-determine or self-correct the amount. This allows a taxpayer with no audit to apply for the TAP;
· The payment should be made, within the specified period indicated on the application (typically one to two weeks);
· The forgiven amount will not be considered as taxable income; and
· If the taxpayer does not comply with all requirements, the benefits of the remission will not be granted.
Other issues related to application of TAP
Each case should be carefully analysed before claiming under the TAP becauses its application may have side effects.
For instance, depending on the assessment made by SAT, an impact on mandatory profit sharing (as a labour obligation) may arise.
Also, in cases where the taxes are derived from international transactions, the portion of tax paid in Mexico could not be utilised abroad as a foreign tax credit since it is considered a voluntary payment.
In cases of transfer pricing audits, the foreign authority may not be willing to accept a corresponding adjustment in that country. In this case, a bilateral advance pricing arrangement may be advisable to counteract the effects on future fiscal years.
It should also be noted that the TAP may have an impact on the net profits account.
By principal Tax Disputes correspondent for Mexico, Fernando Lorenzo Salazar, of PwC.
