Continuing with the series in favor of the taxpayer that began with the entry Pro-Taxpayer Series. Generalities of Federal Tax Law in Mexico it’s now time to talk about the rights and obligations of taxpayers. Given the ease with which the tax authority now has to audit taxpayers, this topic has acquired greater relevance in tax matters.

However, the rights and obligations in federal tax matters are such a broad topic that I will allow myself to divide them into several entries. This in order to analyze each of them in detail. In this sense, in this present entry, I will address the following topics:

List of Contents

• 1) Requests to the Tax Authorities
• A) Consequences For Failure to Comply With the Requirements
• B) Printed Requests
• C) Non-Digitalized Attached Documents
• D) Admonitions
• E) Inapplicability of the Rules
• F) Requests to Make Inquiries or Requests For Authorization
• 2) Free Tax Defense
• 3) Representation Before the Tax Authorities
• A) Registration of Representation
• B) Prohibition of Business Agency
• C) Presentation of Documents for Legal Entities
• 4) Payment of Contributions
• A) Determination of Contributions in Foreign Currency
• B) Crediting in Foreign Currency
• C) Equivalence of the Peso With Other Foreign Currencies
• D) Payment Methods
• E) Checks As a Payment Method
• F) Compensation For Unpaid Check
• G) Order and Priority in Payment
• H) Surcharges For Late Payment
• I) Determination of the National Consumer Price Index

1) Requests to the Tax Authorities

First of all, while we have already seen that, as a general rule, communications with the tax authority must be carried out through electronic means, as seen in the entry Electronic Media in Tax Matters in Mexico, there are also formalities that taxpayers must comply with in order to communicate with the tax authority.

In this sense and in accordance with the law, all requests directed to the federal tax authorities must be presented through a digital document containing an advanced electronic signature. However, taxpayers exclusively dedicated to agricultural, livestock, fishing, or forestry activities not included in the third paragraph of article 31 of the Federal Tax Code^[1] may not use the advanced electronic signature.

Thus, as a general rule, requests must be sent through the tax mailbox and must have at least the following requirements:

I.- The name, the denomination or company name, and the tax domicile stated in the federal registry of taxpayers to establish the authority’s jurisdiction and the zip code that corresponded to it in the said registry.

II.- Indicate the authority to which the request is addressed and its purpose.

III.- The email address to receive notifications.

A) Consequences For Failure to Comply With the Requirements

When the requirements outlined in paragraphs I and II are not met, the tax authorities shall require the applicant to comply with the omitted requirement within a period of 10 days. If the omission is not corrected within this period, the request shall be considered as not submitted, as well as when the e-mail address is not indicated.

B) Printed Requests

As I have already stated, the taxpayers referred to in article 31, third paragraph of the aforementioned Federal Tax Code, may submit their requests through printed documents that are signed by the interested party or by whoever is legally authorized to do so unless the applicant does not know or cannot sign, in which case he shall print his fingerprint.

In addition, the requests must satisfy, at a minimum, the provisions of paragraphs I and II of the previous section, except for the format and the indication of the e-mail address. Likewise, they must indicate the domicile to receive notifications and, where applicable, the person authorized to receive them.

C) Non-Digitalized Attached Documents

On the other hand, when the applicant, even if he has an advanced electronic signature certificate, accompanies documents other than deeds or powers of attorney, and these cannot be digitalized, the request must be presented in printed form, complying with the requirements of section B) of this section, but in any case including his email address.

Finally, it should be noted that public deeds and powers of attorney must always be presented in digital form when accompanied by a digital document.

D) Admonitions

When the requirements referred to in sections B) and C) of this entry are not met, the tax authorities shall require the applicant to comply with the omitted requirement within a period of 10 days. If the applicant does not correct the omission within this period, the promotion shall be deemed not to have been submitted. On the other hand, if the omission consists of not using the approved official form, the tax authorities must specify the respective form in the request.

E) Inapplicability of the Rules

The provisions of the previous sections are not applicable in the case of declarations, applications for registration, or notices to the Federal Registry of Taxpayers referred to in the entirety of article 31 of the Federal Tax Code.

F) Requests to Make Inquiries or Requests For Authorization

In the case of promotions that are presented to the tax authorities in which inquiries or requests for authorization or regime are made in the terms of articles 34^[2], 34-A^[3], and 36 Bis^[4] of the Federal Tax Code, for which there is no official form, they must comply, in addition to the requirements already set out above (for requests in general), with the following:

I.- Indicate the telephone numbers of the taxpayer and his authorized representatives, if applicable.

II.- State the names, domiciles, and federal taxpayer registration or tax identification numbers of all persons involved in the request or query raised in the case of foreign residents.

In any case, foreign residents who are not required to have a tax identification number, in accordance with the legislation of the country in which they are residents, shall not indicate this in the requests they submit to the tax authorities.

III.- Describe the activities carried out by the interested party.

IV.- Indicate the number of operations or operations subject to the query.

V.- State all the facts and circumstances related to the query and the accompanying documents and information supporting such facts or circumstances.

VI.- Describe the business reasons that motivate the proposed operation.

VII.- Indicate whether the facts or circumstances on which the request is based have been previously raised before the same authority or a different one or have been the subject of defense before administrative or jurisdictional authorities and, if applicable, the meaning of the resolution.

VIII.- Indicate whether the taxpayer is subject to the exercise of verification powers by the Ministry of Finance and Public Credit or by the federal entities coordinated in federal revenues, indicating the periods and contributions subject to review. Likewise, it must mention whether it is within the period for the tax authorities to issue the resolution referred to in article 50^[5] of the Federal Tax Code.

2) Free Tax Defense

An important right for taxpayers in Mexico concerns the protection and defense of their rights and interests in tax and administrative matters. For these purposes, the Mexican legislator created the Taxpayer Defense Office through the Organic Law of the Taxpayer Defense Office and the Federal Law of Taxpayer Rights, an autonomous body with technical and operational independence. Finally, given the importance of this tax ombudsman and the taxpayer’s rights, I will later address them in a separate entry.

3) Representation Before the Tax Authorities

In general, individuals and corporations must be represented before the tax authorities through a public deed or a power of attorney signed before 2 witnesses, with the grantor’s and witnesses’ signatures ratified before the tax authorities or a public notary. A copy of the taxpayer’s or legal representative’s identification must accompany the document after it is compared with the original.

The representation of the aforementioned persons will be deemed to be accredited when the person who requests on their behalf has been granted a general power of attorney for acts of administration and ownership or for lawsuits and collections with all the general powers and those that require a special clause under the law, provided that the signatures are ratified before a public notary or, where appropriate, before the tax authorities. All of this is unless the applicable tax provisions require the presentation of a power of attorney with specific characteristics for a particular procedure.

Finally, when the requests must be presented in digital documents by representatives or authorized persons, the corresponding digital document must contain their advanced electronic signatures.

A) Registration of Representation

The grantor of representation for both individuals and legal entities may request the tax authorities to register said representation in the tax authorities’ registry of legal representatives, and they shall issue the corresponding registration certificate.

The registration shall be made utilizing a free document duly signed by the person granting the power and by the person accepting it, accompanied by the document in which the corresponding representation is recorded, as well as the other documents that the Tax Administration System establishes through rules of character.

It’s imperative to emphasize that it is the responsibility of the taxpayer who granted the representation and registered it to request the cancellation of this in the aforementioned registry in cases where the corresponding power is revoked. For these purposes, the tax authorities must be notified within 5 days following the day in which the circumstance occurs; if this is not done, the acts carried out by the person whose representation was revoked shall continue to have full effect.

B) Prohibition of Business Agency

Under no circumstances shall the figure of business agency be admitted in administrative-fiscal procedures, which, according to articles 1896 and 1897 of the Federal Civil Code^[6], the business agent is the one who, without a mandate, power of attorney, and without being obliged to a matter of another, takes charge of it to benefit or avoid harm to the owner of the matter using the same diligence as if it were for his own business.

C) Presentation of Documents for Legal Entities

Notwithstanding the above, legal entities may choose to use their advanced electronic signature or do so with the advanced electronic signature of their legal representative to present digital documents. In the first case, the certificate holder shall be the legal entity. The processing of the data for the creation of an advanced electronic signature of a legal entity may only be carried out by a representative of said person, who has been granted before a public notary a general power for acts of domain or administration; in this case, the representative must previously have a valid certificate of advanced electronic signature.

Legal entities that choose to submit digital documents with their own advanced electronic signature must use the data from the creation of their advanced electronic signature in all their procedures before the Tax Administration Service. In the case of queries or the exercise of legal remedies, the use of the advanced electronic signature referred to in the previous paragraph shall be optional; when this is not used, the corresponding promotion must contain the advanced electronic signature of the legal entity’s representative.

It will be presumed, without admitting proof to the contrary, that the sole administrator submitted the digital documents containing the advanced electronic signature of legal entities, the president of the board of directors, or the person or persons, whatever the name by which they are designated, who have been conferred the general management, general management or administration of the legal entity in question, at the time when the digital documents were submitted.

4) Payment of Contributions

Generally, contributions (if you want to know the contributions in Mexico, check my entry Contributions Contemplated in Mexico) and their accessories shall be caused and paid in national currency. Payments that must be made abroad may be made in the currency of the country in question.

Also, in cases where tax laws establish that the contributions and their accessories must be determined, the National Consumer Price Index shall be applied. This index shall be calculated by the National Institute of Statistics and Geography and published in the Official Journal of the Federation within the first 10 days of the following month.

On the other hand, even fractions of the peso shall be considered to determine the contributions. Notwithstanding the above, to make its payment, the amount shall be adjusted so that those containing amounts from 1 to 50 cents are adjusted to the immediately preceding unit, and those containing amounts from 51 to 99 cents are adjusted to the immediately higher unit.

A) Determination of Contributions in Foreign Currency

To determine the contributions and their accessories, the exchange rate at which the foreign currency in question was acquired shall be considered, and if there is no acquisition, the exchange rate published by the Bank of Mexico in the Official Gazette of the Federation on the day prior to the day on which the contributions are incurred shall be used. On days when the Bank of Mexico does not publish said exchange rate, the last exchange rate published before the day the contributions are incurred shall be applied.

This mechanism shall also determine contributions to foreign trade and pay those that must be made abroad.

B) Crediting in Foreign Currency

When the tax provisions allow the crediting of taxes or amounts equivalent to these, paid in foreign currency, the exchange rate that corresponds to what is indicated in the previous section shall be considered, referring to the date on which the tax being transferred was incurred or, failing that, paid.

C) Equivalence of the Peso With Other Foreign Currencies

The equivalence of the Mexican peso with foreign currencies other than the United States dollar that shall govern for tax purposes shall be calculated by multiplying the exchange rate referred to in section A) mentioned above by the equivalent in dollars of the currency in question, according to the table published monthly by the Bank of Mexico during the first week of the month immediately following the month to which it corresponds.

D) Payment Methods

The following shall be accepted as payment methods for contributions: checks from the same bank where the payment is made, electronic transfer of funds in favor of the Federation’s Treasury, and credit and debit cards, in accordance with the general rules issued by the Tax Administration Service.

Also, taxpayers who are individuals who carry out business activities and who in the immediately preceding fiscal year had obtained income of less than 2,761,230, as well as individuals who do not carry out business activities and who had received income of less than 473,350 in said fiscal year, shall pay their contributions in cash, electronic transfer of funds in favor of the Federal Treasury, credit and debit cards or personal checks from the same bank.

E) Checks As a Payment Method

Special mention must be made regarding checks since payment by this method may be made when they are issued from the taxpayer’s account and are issued by the taxpayer himself to cover the full amount of contributions and their accessories through periodic declarations, even in the case of payments made by public notaries who, under tax provisions, are obliged to determine and pay contributions to be paid by third parties.

On the other hand, the check by which contributions and their accessories are paid must be issued in favor of the Federal Treasury. In addition, contributions were administered by the federative entities in favor of their treasury or equivalent body, and social security contributions were collected by a decentralized body in favor of the body itself.

Likewise, checks for the payment of contributions and their accessories shall not be negotiable, and their amount must be paid exclusively into the bank account of the Treasury of the Federation, the local treasury or equivalent body, or the corresponding decentralized body, as the case may be.

Finally, the payment of tax liabilities may be made through the taxpayer’s personal checks, provided that it complies with the above, through the executing notifiers at the time of carrying out any diligence of the administrative enforcement procedure. In that case, the identification data and value of the check shall be recorded in the respective minutes, as well as the number of the official receipt that is issued.

F) Compensation For Unpaid Check

A check received by the tax authorities that is presented on time and is not paid shall give rise to the collection of the check amount and compensation, which will always be 20% of its value and shall be required independently of the other applicable tax concepts.

For this purpose, the authority shall require the issuer of the check to make the payment within 3 days, together with the aforementioned compensation of 20%, or to prove reliably, with the relevant documentary evidence, that the payment was made or that said payment was not made for reasons exclusively attributable to the credit institution.

After the previous period has elapsed without obtaining the payment or proving any of the causes excluding liability already stated, the tax authority shall require and collect the amount of the check, the aforementioned compensation, and the other accessories that correspond through the Administrative Enforcement Procedure, without prejudice to the liability that may be applicable.

G) Order and Priority in Payment

The payments made shall be applied to the oldest credits, provided that it is the same contribution and before the main debt, to the accessories in the following order:

I.- Execution costs.

II.- Surcharges.

III.- Fines.

IV.- The compensation referred to in the previous section.

On the other hand, when the taxpayer files a legal defense challenging any of the concepts indicated above, the order stated therein shall not be applicable with respect to the concept challenged and guaranteed.

H) Surcharges For Late Payment

When contributions or benefits are not paid on the date or within the period established by the tax provisions, their amount shall be updated from the month the payment should have been made until the payment is made. In addition, surcharges must be paid to compensate the federal treasury for the lack of timely payment.

Said surcharges shall be calculated by applying to the amount of the contributions or benefits updated for the period referred to in the previous paragraph, the rate resulting from adding the rates applicable in each year for each of the months elapsed in the period of updating of the contribution or benefit in question.

The rate of surcharges for each of the months of delay shall be the rate resulting from an increase of 50%, which is the rate set annually by the Congress of the Union by law. For this purpose, the rate shall be considered up to the hundredth and, if applicable, shall be adjusted to the next higher hundredth when the thousandth digit is equal to or greater than 5, and when the thousandth is less than 5, the rate shall be maintained at the hundredth that has resulted.

The surcharges shall be incurred for up to 5 years, except in the cases referred to in article 67 of the Federal Tax Code, in which cases the surcharges shall be incurred until the powers of the tax authorities to determine the omitted contributions or benefits and their accessories are extinguished; and they shall be calculated on the total tax liability, excluding the surcharges themselves, the compensation for unpaid check, the execution costs and the fines for violation of the tax provisions.

In cases of third-party guarantees of tax obligations, surcharges shall be incurred on the required amount and up to the guaranteed limit when the obligation is not paid within the legal term.

Furthermore, when the payment is made but less than the corresponding amount, the surcharges shall be calculated on the difference. Likewise, when the surcharges determined by the taxpayer are less than those calculated by the tax collection office, the latter must accept the payment and proceed to demand the remainder.

Finally, the surcharges in question shall be charged for each month or fraction that passes from the day the payment should have been made until the payment is made. In no case may the tax authorities release the taxpayers from updating the contributions or reduce totally or partially the corresponding surcharges.

I) Determination of the National Consumer Price Index

The determination of the National Consumer Price Index for the purposes of payment of the aforementioned contributions and calculated by the National Institute of Statistics and Geography shall be subject to the following:

I.- Prices shall be quoted in at least 30 cities, which will be located in at least 20 federal entities. The selected cities must in all cases have a population of 20,000 or more inhabitants and must always include the 10 metropolitan areas or most populated cities in Mexico.

II.- The prices corresponding to at least 1,000 specific products and services grouped into 250 consumption concepts must be quoted. These concepts shall cover at least 35 branches of the agricultural, livestock, industrial, and service sectors, according to the catalog of economic activities prepared by the National Institute of Statistics and Geography.

III.- Regarding food, price quotes shall be made at least 3 times each month. The rest of the quotes shall be obtained one or more times per month.

IV.- The price quotes with which the National Consumer Price Index is calculated for each month must correspond to the period in question.

V.- Each month’s National Consumer Price Index shall be calculated using the Laspeyres formula. Weighting factors shall be applied for each category of household consumption considering the following concepts:

Food, beverages, and tobacco; clothing, footwear, and accessories; housing; furniture, appliances, and household goods; health and personal care; transportation; education and entertainment; and other services.

By Omar Gómez

Mexican Tax, Administrative, and Constitutional Attorney

Partner

Contact me at [email protected] 

---

^[1] Article 31.- […]

The Tax Administration Service, through general rules, may authorize organizations that group taxpayers indicated in the same rules, to submit on their behalf the declarations, notices, requests and other documents required by the tax provisions.

^[2] Article 34. – Tax authorities shall only be obliged to answer queries about real and specific situations made by interested parties individually.

The authority shall be obliged to apply the criteria contained in the reply to the query in question, provided that the following is met:

I. That the query includes the background and circumstances necessary for the authority to be able to make a decision on the matter.

II. That the background and circumstances that give rise to the query have not been modified after its presentation to the authority.

III. That the query is formulated before the authority exercises its powers of verification with respect to the real and specific situations to which the query refers. The authority shall not be bound by the response given to queries made by taxpayers when the terms of the query do not coincide with the reality of the facts or data consulted or the applicable legislation is modified.

The responses to the queries referred to in this article shall not be binding on individuals, and they may therefore challenge, through the legal remedies established in the applicable provisions, the final resolutions in which the authority applies the criteria contained in said responses.

The tax authorities must respond to the queries formulated by individuals within a period of three months from the date of submission of the respective request.

The Tax Administration Service shall publish a monthly extract of the main resolutions favourable to the taxpayers referred to in this article, and must comply with the provisions of article 69 of this Code.

^[3] Article 34-A.- The tax authorities may resolve queries made by interested parties regarding the methodology used to determine the prices or amounts of consideration in transactions with related parties, in accordance with Article 179 of the Income Tax Law, provided that the taxpayer submits the information, data and documentation necessary for the issuance of the corresponding resolution. These resolutions may arise from an agreement with the competent authorities of a country with which there is a treaty to avoid double taxation.

The resolutions issued under the terms of this article may take effect in the fiscal year in which they are requested, in the immediately preceding fiscal year and for up to three fiscal years following the one in which they are requested. The validity may be longer when they arise from an amicable procedure, in accordance with an international treaty to which Mexico is a party.

The validity of resolutions may be subject to compliance with requirements demonstrating that the operations subject to the resolution are carried out at prices or amounts of consideration that would have been used by independent parties in comparable operations.

^[4] Article 36 Bis.- Administrative resolutions of an individual or directed at groups, issued in tax matters that grant an authorization or that, being favorable to individuals, determine a tax regime, shall take effect in the fiscal year of the taxpayer in which they are granted or in the immediately preceding fiscal year, when the resolution has been requested, and it is granted within three months following the end of the same.

At the end of the fiscal year for which a resolution of those indicated in the previous paragraph has been issued, the interested parties may submit the circumstances of the case to the competent tax authority so that it may issue the appropriate resolution.

This provision shall not apply to authorizations relating to extensions for payment in installments, acceptance of guarantees of fiscal interest, those required by law for deductions in fixed asset investments, and those referred to in article 59 of the Income Tax Law.

^[5] Article 50.- Tax authorities that, when visiting taxpayers or exercising the verification powers referred to in Article 48 of this Code, become aware of facts or omissions that entail non-compliance with tax provisions, shall determine the omitted contributions by means of a resolution that shall be notified personally to the taxpayer or through the tax mailbox, within a maximum period of six months from the date on which the final record of the visit is drawn up or, in the case of the review of the taxpayers’ accounting carried out in the offices of the tax authorities, from the date on which the periods referred to in Sections VI and VII of Article 48 of this Code conclude.

The period for issuing the resolution referred to in this article shall be suspended in the cases provided for in Sections I, II and III of Article 46-A of this Code.

If, during the period for issuing the resolution in question, the taxpayers file any legal remedies in the country or abroad, against the final inspection report or the observations letter in question, said period shall be suspended from the date on which said legal remedies are filed and until a final resolution is issued.

When the authorities do not issue the corresponding resolution within the aforementioned period, the order and the actions that arose during the inspection or review in question shall be without effect.

The resolution must indicate the periods within which it can be challenged in the revocation relief and in the administrative contentious trial. When the resolution omits the reference, the taxpayer shall have double the period established by the legal provisions to file the revocation relief or the administrative contentious trial.

^[6] Article 1896.– Whom without a mandate and without being obliged to do so, takes charge of another’s business, must act in accordance with the interests of the owner of the business.

Article 1897.- The agent must carry out his duties with all the diligence he employs in his own business, and he shall indemnify the damages and losses incurred by his fault or negligence to the owner of the property or business he manages.