Mexico’s Tax Amnesty Program
The Mexican tax administration (Servicio de Administración Tributaria, or “SAT”) established a tax amnesty program, effective in 2013, that provides an opportunity for individuals and businesses to qualify for total or partial waiver of tax assessments of federal taxes, certain fees, and penalties levied on the failure to fulfill tax obligations. All amnesty requests must be made by May 31, 2013.
The program includes the following benefits:
- For taxes due for years prior to 2007, a reduction of 80 percent of the tax due, restated for inflation, and a 100 percent reduction of interest charges, penalties, and collection expenses.
In the event the taxpayers were audited by the tax authorities during tax years 2009, 2010, and 2011, and, as a consequence of the audit, it was determined they complied with their tax obligations, or they paid any tax deficiencies determined by the tax authorities, and to the extent they are up to date in complying with their tax obligations, the forgiveness will be equivalent to 100 percent of the tax liability.
- For taxes due for years 2007 through 2012, a reduction of 100 percent of interest charges, penalties, and collection expenses (i.e., unpaid tax restated for inflation would have to be paid).
In any case, the portion of the tax liability not forgiven according to this program must be fully paid in order to qualify for the program.
This amnesty program is available both for taxes assessed by the tax authorities, and for self-determined taxes that are voluntarily corrected by taxpayers.
Additionally, it is provided that in the case of tax assessments that have been challenged by taxpayers through any legal remedy, such legal mean shall be withdrawn prior to requesting the authorization for applying the program.
For the application for the amnesty, the Federal Revenue Law for 2013 established that taxpayers must file a formal written request (application) before the tax authorities, complying with the requirements established through administrative rules.
The requirements are detailed below:
Unlike the Federal Revenue Law that granted the amnesty program for tax year 2013, the Regulations establish that taxpayers must file an online application to be eligible for the tax amnesty program no later than May 31, 2013, before the tax office that corresponds to the taxpayer’s tax domicile.
The procedure to be followed to file the application consists of accessing the Tax Administration Service’s (“TAS”) website by using the taxpayer’s electronic signature, and reviewing the taxes that will be listed by the tax authorities as eligible for the application of the amnesty program. Any differences would need to be clarified with the tax authorities prior to requesting the application of the program.
If the taxes are self-determined and they are not listed in the TAS’s website, the taxpayer may detail the type of taxes, periods, etc., in order to request the application of the program for such amounts. In cases where the taxes derive from tax assessments that were challenged by the taxpayers and that are still in process of being resolved, the legal remedy must first be withdrawn, and evidence of the motion filed by the taxpayer must be attached to the tax amnesty application, or may be sent by postal service to the tax authorities within 30 days.
As a general rule, once the application is submitted, and the amounts that were not forgiven are paid in accordance with the instructions provided in the website, the program is considered as correctly applied and the process is concluded, without the need for a formal response by the tax authorities. If the taxpayer explicitly requests a formal response confirming the application of the program, then the tax authorities will issue a ruling within a 30-day period.
Some additional details of the process are included in the Regulations, which would need to be reviewed in detail if it is intended to apply this program for any taxes due.
Clarification of “Audited tax years” for purpose of increasing forgiveness
These regulations clarify what should be understood as having been audited during years 2009, 2010, and 2011 (which would enable the taxpayer to qualify for a 100 percent forgiveness of the taxes due corresponding to periods preceding 2007), since this could have been interpreted in two different ways:
- The taxpayer was audited in respect of such tax years, or
- The taxpayer was subject to an audit during such years with respect to different periods
In this regard, it is established that the applicable requirements will be met if the taxpayer has been subject to a tax audit for each and every tax year of 2009, 2010, and 2011, and that as a result of such audits, either the tax authorities determined the taxpayer correctly complied with its obligations, or the taxpayer paid any taxes due that have been determined in such processes.
Tax amnesty is not taxable income
The Regulations provide that the amounts forgiven under the tax amnesty program will not be considered as taxable income for income tax purposes.
Voidance of tax amnesty
The Regulations also provide that when any of the applicable requirements provided by the Federal Revenue Law and the Regulations are not met, the benefits of the amnesty program will not have any effect.