On November 18, the Third Resolution of Amendments to the Miscellaneous Tax Resolution for 2020 (the “Third Resolution”) was published in the Official Gazette of the Federation, primarily setting forth the rules applicable to the disclosure of reportable schemes.
First, it is important to recall that the obligation to disclose reportable schemes was incorporated by virtue of the Decree amending, adding to, and repealing various provisions of the Income Tax Law, the Value Added Tax Law, the Special Tax on Production and Services Law, and the Federal Tax Code, published in the Official Gazette of the Federation on December 9, 2019. However, the deadlines to comply with such obligation and the other obligations set forth in Title Six of the Federal Tax Code will begin to run as of January 1, 2021 (the date on which the applicable rules of the Third Resolution will also enter into force). In connection with the foregoing, it is of utmost importance to consider that the reportable schemes that must be disclosed are those designed, marketed, organized, implemented, or administered as of the year 2020, or prior to such year when any of their tax effects is reflected in the fiscal years comprised as of 2020. Below are the rules we consider most relevant contained in the Third Resolution, specifically with respect to the disclosure of such schemes: In principle, the Third Resolution established that tax advisors or taxpayers, as applicable, must file the “Informative return to disclose generalized and customized reportable schemes,” in accordance with the provisions of procedure form 298/CFF contained in Annex 1-A thereof. Likewise, the manner of filing supplementary informative returns for modifications to the disclosed reportable scheme is established, as well as for tax advisors released from the obligation to disclose the reportable scheme. A document in PDF format, with the corresponding information and documentation, must be attached to the referenced informative returns, as detailed in each rule applicable to each reportable scheme. The detailed descriptions of the reportable schemes referred to in the rules of the Third Resolution are those that have the following characteristics: 1. They prevent foreign authorities from exchanging tax or financial information with the Mexican tax authorities. 2. They prevent the application of Article 4-B of the Income Tax Law relating to income obtained through foreign tax-transparent entities, foreign legal figures, and transparent foreign legal figures. 3. They consist of one or more legal acts that allow the transfer of tax losses pending to be applied against tax profits to persons other than those that generated them. 4. They consist of a series of payments or interconnected transactions that return all or part of the amount of the first payment forming part of such series to the person who made it or to any of its partners, shareholders, or related parties. 5. They consist of the application by a foreign resident of a double taxation treaty with respect to income that is not taxed in the country of residence or is taxed at a reduced rate. 6. They involve transactions between related parties in which: a) Hard-to-value intangible assets are transferred. b) Business restructurings are carried out in which there is no consideration for the transfer of assets, functions, and risks, or when, as a result of such restructuring, taxpayers taxed in accordance with Title II of the Income Tax Law reduce their operating profit by more than 20%. c) Assets and rights are transferred or their temporary use or enjoyment is granted without consideration, or services are rendered without remuneration. d) There are no reliable comparables because they are transactions involving unique or valuable functions or assets, or e) A unilateral safe harbor granted by foreign legislation is used. 7. They prevent the constitution of a permanent establishment in Mexico under the terms of the Income Tax Law and the treaties to avoid double taxation. 8. They involve the transfer of a wholly or partially depreciated asset that allows its depreciation by another related party. 9. They involve a hybrid mechanism defined in the Income Tax Law. 10. They prevent the identification of the beneficial owner of income or assets. 11. When there are tax losses whose period to apply their reduction against tax profit is about to expire and transactions are carried out to obtain tax profits against which such losses are applied. 12. They prevent the application of the additional 10% rate on distributed dividends. 13. In which the temporary use or enjoyment of an asset is granted and the lessee in turn grants it to the lessor or a related party of the latter. 14. They involve transactions whose accounting and tax records present differences greater than 20%, except for the calculation of depreciation. 15. In the case of any mechanism aimed at preventing the application of Article 199 of the Federal Tax Code so that any of the scenarios set forth in said article is triggered for the reportable schemes to be configured (referred to in the preceding paragraphs). It is specified that mechanisms that prevent the application of Article 199 of the Federal Tax Code are considered to include, among others, any plan, project, proposal, advice, instruction, or recommendation aimed at materializing a series of legal acts whose purpose is to prevent any of the scenarios set forth in said article from being triggered for a reportable scheme to be configured. Now, it is established that tax advisors who disclose reportable schemes in the name and on behalf of other tax advisors must issue to each of the latter a certificate of release from the obligation to disclose reportable schemes. Likewise, the information that such certificates must contain is set forth. In connection with the certificate of a non-reportable scheme or of the existence of a legal impediment to disclose a reportable scheme, it is provided that tax advisors who consider that a scheme that generates or will generate tax benefits in Mexico is not reportable because the plan, project, proposal, or advice does not have any of the characteristics set forth in the referenced Code, or because they consider that there is a legal impediment to disclosing the reportable scheme, must issue it in accordance with the provisions of procedure form 301/CFF contained in the aforementioned Annex 1-A. Likewise, it is specified that the tax authority may require tax advisors or taxpayers to provide information and documentation in addition to that provided with respect to the reported scheme. In such case, the tax advisor or taxpayer must submit the additional information and documentation required or, as applicable, the statement, under penalty of perjury, indicating that they are not in possession thereof, under the terms set forth in procedure form 302/CFF contained in the aforementioned Annex 1-A. Finally, it is provided that tax advisors must provide the information of the taxpayers to whom a generalized or customized reportable scheme was marketed by means of the corresponding informative return under the terms of procedure form 303/CFF contained in the aforementioned Annex 1-A. We suggest analyzing internally whether there are schemes that you consider should be reported, and thus comply with the obligations set forth in the Federal Tax Code and in the Third Resolution in a timely and proper manner. The foregoing in order to avoid the imposition of the corresponding sanctions, such as, for the obligated taxpayer, a fine of 50% to 75% of the tax benefit obtained or expected to be obtained (in addition to the loss of such benefit). For additional information, please contact our experts: Fernando Moreno, Partner: +52 (55) 5258 1008 | fmoreno@vwys.com.mx Jorge Díaz Carvajal, Associate: +52 (55) 5258 1008 | jdiaz@vwys.com.mx Diego Benítez, Associate: +52 (55) 5258 1008 | dbenitez@vwys.com.mx
