Now that I have dealt with the issue of how requests and payments should be made in tax matters in the entry Requests and Payments in Mexico’s Tax Matters, it’s time to continue talking about the rights and obligations contemplated in tax legislation. In this case, I will talk about tax refunds and undue payments, a topic for which I will explain its general rules.
However, the reader must be aware that what is set out here may conflict with or have additional rules in the case of certain special taxpayers since in the Resolution of the Tax Miscellany for the Fiscal Year 2024 from rules 2.3 to 2.3.15 there are certain additional facilities and requirements for taxpayers with specific economic activities. Rules I will not analyze in full due to space, but of which the reader is made aware of their existence in case they apply to them.
Without further ado, let’s begin:
List of Contents
- 1) Refund of Contributions. General Rules
- A) Refund By Fiscal Year
- B) Refund By An Act of Authority
- C) Request For Refund As Not Submitted
- D) Requests and Clarifications
- E) Requirements For Requesting a Refund
- F) Deadline For the Refund
- G) Partial Refund
- H) Commence of the Verification Powers
- I) Updated Refund
- J) Remaining Powers of Review
- K) Statutes of Limitations
- L) Bank Statements As Proof of Payment
- 2) Special Updating Rules
- A) Refund In Compliance With a Resolution
- 3) Verification Powers
1) Refund of Contributions. General Rules
As a general rule, the tax authorities shall refund the amounts paid unduly and those due under the tax laws. In the case of contributions withheld, the refund shall be made to the taxpayers from whom the contribution in question was withheld.
In the case of indirect taxes, the refund for payment of the undue amount shall be made to the persons who have paid the tax transferred to the person who caused it, provided that they have not accredited it; therefore, whoever transferred the tax, whether expressly and separately or included in the price, shall not have the right to request its refund. Also, those indirect taxes paid on importation shall be refunded to the taxpayer provided that the amount paid has not been credited.
The provisions of the previous paragraph shall apply without prejudice to the crediting of indirect taxes to which taxpayers are entitled under the provisions of the laws that establish them, such as the Value Added Tax Law.
A) Refund By Fiscal Year
When the contribution is calculated by fiscal year, the refund of the credit balance may only be requested when the fiscal year declaration has been submitted unless it is the fulfillment of a final resolution or judgment of a competent authority, in which case, the refund may be requested independently of the presentation of the declaration.
The refund may be made ex officio or at the request of a party.
B) Refund By An Act of Authority
If the payment of the undue amount was made in compliance with an act of authority, the right to the refund arises when the said act is annulled. However, this is not applicable in the determination of differences due to arithmetic errors, which shall give rise to the refund provided that the obligation has not expired.
C) Request For Refund As Not Submitted
The refund request shall be considered not submitted in cases where the taxpayer or the domicile stated by them is not located in the Federal Registry of Taxpayers. In any case, when the application is deemed not to have been submitted, it shall not be considered a collection procedure that interrupts the statutes of limitation of the obligation to repay.
D) Requests and Clarifications
When a refund request contains errors in the data contained therein, the tax authority shall require the taxpayer to clarify said data in writing within a period of 10 business days, warning him that if he does not do so within the said period, he shall be deemed to have withdrawn the corresponding refund request. In this case, submitting a new request is unnecessary when the erroneous data has only been entered in the request or the attachments.
Said request shall suspend the period provided for making the refund during the period that elapses between the business day following the notification of the request and the date on which the request is attended to.
Likewise, the tax authorities, in order to verify the origin of the refund, may require the taxpayer, within a period of no more than 20 days after the presentation of the refund request, the additional data, reports, or documents that it considers necessary and that are related to it. For this purpose, the tax authorities shall require the applicant to comply with the request within a maximum period of 20 days, with the warning that if he does not do so within this period, he shall be deemed to have withdrawn the corresponding refund request.
However, the tax authorities may only make a new request within 10 days after the first request was fulfilled when it refers to data, reports, or documents provided by the taxpayer when responding to it. In this regard, to comply with the second request, the taxpayer shall have a period of 10 days, counted from the day after the notification of said request takes effect.
Furthermore, when the tax authority requires the taxpayer to provide the aforementioned data, reports, or documents, the period elapsed between the date on which the first request for these was notified and the date on which these are provided in full by the taxpayer, whether due to the first or second request, shall not be considered in the calculation of the aforementioned refund period.
Finally, the tax authorities shall not be considered to have initiated their verification powers when they request the data, reports and documents since they can initiate them at any time.
E) Requirements For Requesting a Refund
In addition to complying with the rules for general requests before the tax authorities, which I discussed in the previous entry—see the preface to this entry—taxpayers must comply with the following to make the refund request:
I.- The institution’s data that is part of the financial system.
II.- The taxpayer’s account number for electronic transfers in said financial institution.
On the other hand, under rule 2.3.8 of the Miscellaneous Tax Resolution for Fiscal Year 2024, the application must be submitted through the FED (Electronic Refund Format)
III.- Individuals who have chosen to continue paying taxes under Title IV, Chapter II, Section II of the Income Tax Law, in force until December 31, 2021, must accompany their refund request with the information in Annexes 7 and 7-A, which are obtained on the Tax Administration Service Portal at the time the taxpayer enters the FED.
IV.- In the case of individuals who request a refund of the balance in favor of Income Tax in their declaration for the year under rule 2.3.2., the terms of this rule shall apply.
V.- On the other hand, individuals who receive income from salaries and wages, who have balances in favor of Income Tax not compensated by the withholding agents in terms of article 97, fourth paragraph of the Income Tax Law, must comply with the procedure form 13/CFF “Request for Refund of amounts in favor of other Contributions”, contained in Annex 1-A of the Resolution of the Tax Miscellany for the Fiscal Year 2024.
VI.- Taxpayers who have amounts in favor and request their refund, in addition to meeting the requirements referred to in the tax provisions, must have the certificate of the e.signature or the portable e.signature when submitting the refund request.
VII.- In the case of individuals who are not required to register with the Federal Taxpayers Registry, whose balances in favor or payments of undue amounts are less than $10,000.00, it shall not be necessary for them to have the aforementioned certificate, so said amounts may be requested through any Tax Service Module of the ADSC.
VIII.- In terms of the first paragraph of the rule under study, requests for refund of “Resolution or Sentence”, “Diplomatic Missions”, “International Organizations” and “Foreigners without Permanent Establishment who do not have a Federal Taxpayers Registry”, must be submitted at any Tax Service Module of the ADSC.
IX.- Likewise, in the case of taxpayers under the jurisdiction of the AGH (General Hydrocarbon Administration), in the case of “Foreigners without Permanent Establishment who do not have a Federal Taxpayer Registry”, the procedures must be submitted directly to the aforementioned official office.
X.- Taxpayers under the jurisdiction of the AGGC (Large Taxpayers Administration) and the AGH must comply with the processing form 8/CFF “Request for Refund of Balances in Favor and Payments of Undue Credit, Large Taxpayers or Hydrocarbons”, contained in Annex 1-A.
XI.- Lastly, in the cases of “Foreigners without Permanent Establishment who do not have a Federal Taxpayer Registry” and “Resolution or Judgment”, when it concerns requests for refund of amounts unduly paid to the Federal Treasury due to foreign trade operations, in terms of the first paragraph of this rule, the procedures must be submitted at the AGACE window, located at Avenida Hidalgo, number 77, Module III, ground floor, Colonia Guerrero, Alcaldía Cuauhtémoc, C.P. 06300, Mexico City.
F) Deadline For the Refund
When a refund is requested, it must be made within 40 days from the date on which the request was submitted to the competent tax authority.
G) Partial Refund
When the refund request contains only arithmetic errors in determining the amount requested, the tax authorities shall refund the corresponding amounts without submitting a supplementary declaration. The tax authorities may refund a smaller amount than that requested by the taxpayers due to the review of the documentation provided. In this case, the request shall be considered denied for the part that is not refunded unless there are arithmetic or formal errors.
If the tax authorities return the taxpayers’ refund request, it shall be considered that it was denied in its entirety. For such purposes, the tax authorities must justify and motivate the causes supporting the partial or total denial of the refund.
H) Commence of the Verification Powers
When, on the occasion of the request for a refund, the tax authority initiates verification powers in order to verify the admissibility of the refund, the periods referred to in section 1), subsection D) of this entry shall be suspended until the resolution is issued in which the admissibility of the refund request is resolved. In any case, the aforementioned initiation of the verification powers shall be subject to the procedure described in section 3) of this entry.
However, if, once the review carried out in the exercise of the verification powers to verify the admissibility of the refund is concluded, the refund is authorized, the authority shall make the corresponding refund within 10 business days following the date on which the respective resolution is notified. When the refund is made outside the aforementioned period, interest shall be paid, which shall be calculated under the provisions of section 2) of this entry.
I) Updated Refund
The federal treasury must pay the refund that is due, updated under the provisions of section 14) Update of Contributions of the entry Pro-Taxpayer Series. Generalities of Federal Tax Law in Mexico, from the month in which the payment of the undue amount was made or the declaration containing the balance in favor was filed until the month in which the refund is available to the taxpayer.
In the case of a deposit in an account, it shall be understood that the refund is available to the taxpayer from the date on which the authority deposits in the financial institution indicated in the refund request.
On the other hand, when the administrative act authorizing the refund correctly determines the update and the interest that may be applicable, calculated on the date on which said act is issued on the legally applicable amount, said refund shall be deemed to be duly made provided that no more than one month has elapsed between the date of issue of the authorization and the date on which the refund is available to the taxpayer.
However, in the event that a new National Consumer Price Index is published during the aforementioned month, the taxpayer shall have the right to request the refund of the corresponding update, which will be determined by applying the total amount for which the refund was authorized, the factor obtained in accordance with the provisions of the procedure already submitted, subtracting one from said factor. In any case, the factor shall be calculated considering the period from the month the authorization was issued and the month the refund was made available to the taxpayer.
Finally, the amount of the update in question must be made available to the taxpayer, if applicable, within a period of 40 days following the date on which the corresponding refund request is submitted; when the delivery is made outside the aforementioned period, the tax authorities shall pay interest that will be calculated in accordance with the provisions of section 2) of this entry. Said interest shall be calculated on the updated refund amount for the period between the month in which the corresponding refund was made available to the taxpayer and the month in which the updated refund is made available to the taxpayer.
J) Remaining Powers of Review
When the tax authorities proceed to refund without exercising the powers of verification, the refund order shall not imply a favorable resolution for the taxpayer, and the authority’s verification powers shall be safeguarded. If the refund has been made and is not applicable, surcharges shall be incurred on the updated amounts, both for those returned unduly and for any interest paid by the tax authorities from the date of the refund.
K) Statutes of Limitations
The obligation to return amounts paid unduly expires under the same terms and conditions as the tax liability. For these purposes, the request for refund submitted by the individual is considered as a collection procedure that interrupts the statutes of limitations, except when the individual withdraws the request.
L) Bank Statements As Proof of Payment
The tax authorities shall make the refund by deposit in the bank account of the taxpayer who requests it, for which the latter must provide the bank account number in the refund application or in the corresponding declaration. For these purposes, financial institutions’ account statements shall be considered proof of payment of the respective refund.
In cases where, on the day the deadline for the refund expires, it is not possible to deposit due to causes attributable to the financial institution designated by the taxpayer, the deadline shall be suspended until the deposit can be made.
The aforementioned deadline shall also be suspended when it is not possible to deposit in the account provided by the taxpayer because it does not exist or has been canceled or when the account number provided by the taxpayer is incorrect until the taxpayer provides a valid account number.
2) Special Updating Rules
As I have already explained, as a general rule, when taxpayers submit a request for a refund or an undue payment, and the refund is made outside the period established in the previous section, the tax authorities shall pay interest that shall be calculated from the day after the expiration of the said period in accordance with the rate provided for in H) Surcharges For Late Payment that shall be applied to the updated refund.
A) Refund In Compliance With a Resolution
When the taxpayer submits a refund request that is denied and is subsequently granted by the authority in compliance with a resolution issued in an administrative legal remedy or a judgment issued by a judicial body, the calculation of interest shall be made from:
I.- In the case when the payment of the undue amount was determined by the taxpayer himself, from the moment the authorization was denied or the period of 40 or 25 days, as the case may be, to make the refund expire. Whichever occurs first.
II.- When the payment of the undue amount has been determined by the authority, from the moment the said credit was paid.
When a request for a refund of the undue amount has not been submitted and the refund is made in compliance with a resolution issued in an administrative legal remedy or a judgment issued by a jurisdictional body, the calculation of the interest shall be made from the moment the administrative relief was filed or, where appropriate, the respective lawsuit, for the payments made prior to said assumptions. For subsequent payments, from the moment the payment was made.
On the other hand, when the federal treasury must pay interest to taxpayers on the updated amounts that it must return to them, it shall pay said interest together with the principal amount subject to the updated refund. In the event that the tax authorities do not pay the interest or pay it in a smaller amount, the right to payment of these shall be considered denied, in full or for the unpaid portion, as appropriate.
In no case shall the interest charged to the federal treasury exceed that accrued in the last 5 years.
Finally, the refund shall be applied first to interest and, subsequently, to the amounts paid unduly.
3) Verification Powers
The verification powers to verify the provenance of the aforementioned refund shall be carried out by exercising the powers established in sections II or III of article 42 of the Federal Tax Code[1]. The tax authority may exercise the verification powers referred to in this provision for each refund request submitted by the taxpayer, even when it relates to the same contributions, benefits and periods, in accordance with the following:
I.- The exercise of the verification powers must conclude within 90 days from the date the taxpayers are notified of the start of said powers.
However, in the event that the authority, in order to verify the origin of the refund, must request information from third parties related to the taxpayer, as well as in the case of taxpayers referred to in section B of article 46-A of the Federal Tax Code[2], the deadline to conclude the exercise of verification powers shall be 180 days counted from the date on which the taxpayers are notified of the start of said powers.
Both deadlines shall be suspended if during the deadline to conclude the home visit or the review of the taxpayer’s accounting in the authorities’ offices themselves, the taxpayers file any legal remedies in the country or abroad against the acts or activities that derive from the verification powers. The deadlines shall be suspended until a final resolution on the legal remedy is issued.
II.- The power of verification referred to in this section shall be exercised only to verify the origin of the requested refund or payment of the undue amount without the authority to determine a tax liability payable by the taxpayers based on the exercise of its power of verification.
III.- If the authority requests information from third parties related to the taxpayer subject to review, it must inform the latter of this.
IV.- If there are several requests from the same taxpayer regarding the same contribution, the tax authority may exercise powers for each or all of the requests and issue a single resolution.
V.- In the event that the tax authorities do not conclude the exercise of the powers of verification, the actions that have been carried out shall be without effect, and they must decide on the refund request with the documentation available.
VI.- Once the exercise of verification powers has concluded, the authority must grant the taxpayer a period of 20 days counted from the day after the notification of the last partial report or observation letter takes effect, to present the documents, books or records that refute the facts or omissions discovered during the review.
VII.- At the end of the period granted for the taxpayer to refute the facts or omissions during the review, the tax authority must issue the corresponding resolution and must notify the taxpayer within a period of no more than 20 business days.
If the decision is favorable, the authority shall make the corresponding refund within 10 days following the date on which the respective resolution is notified.
In the event that the refund is made outside the aforementioned period, interest shall be paid and shall be calculated in accordance with the provisions of section 2), paragraph A) of this entry.
By Omar Gómez
Mexican Tax, Administrative and Constitutional Attorney
Partner
Contact me at [email protected]
[1] Article 42.- In order to verify that taxpayers, jointly liable parties, third parties related to them, tax advisors, financial institutions; trustees, trustors or beneficiaries, in the case of trusts, and contracting or member parties, in the case of any other legal entity, have complied with tax and customs provisions and, where appropriate, determine omitted contributions or tax liabilities, as well as to verify the commission of tax crimes and to provide information to other tax authorities, the tax authorities shall be empowered to: […].
II.- Require taxpayers, jointly liable parties or third parties related to them to display at their domicile, establishments, in the offices of the authorities themselves or within the tax mailbox, depending on the manner in which the request was made, the accounting, as well as to provide the data, other documents or reports required of them in order to carry out their review.
III.- Carry out visits to taxpayers, jointly liable parties or third parties related to them and review their accounting, assets and merchandise. […].
[2] Article 42-A.- The tax authorities must conclude the visit carried out at the tax domicile of the taxpayers or the review of their accounting carried out in the offices of the same authorities, within a maximum period of twelve months counted from the moment the taxpayers are notified of the beginning of the verification powers, except in the case of: […]
B. Taxpayers regarding whom the tax or customs authority requests information from tax or customs authorities of another country or is exercising its powers to verify compliance with the obligations established in articles 76, sections IX and XII, 90, penultimate paragraph, 110, section XI, 179 and 180 of the Income Tax Law or when the customs authority is carrying out the verification of origin to exporters or producers from other countries in accordance with the international treaties signed by Mexico. In these cases, the period shall be two years from the date on which taxpayers are notified of the start of the verification powers.