On 8 September 2020, the Mexican Executive Branch has submitted Economic Package for fiscal year 2021 including a proposal of Tax Reform. The proposed 2021 Tax Law clarifies income tax law, value-added tax (VAT) law, and federal tax code. Tax key tax changes to be approved for 2021 are as following:
Law on Income Tax
During fiscal year 2021, the annual withholding rate referred to in articles 54 and 135 of the Income Tax Law will be 0.97%.
For maquiladora companies, an adjustment to the wording of the third paragraph of article 182 of the Mexican Income Tax Law (LISR) is proposed. The amendment seeks to clarify that for maquiladora companies they must apply the Safe Harbor methodology or request an Advance Transfer Pricing Agreement (APA) from the Tax Authority. In the same manner, changes are also proposed aimed at considering, as serious, the breach of the transfer pricing provisions contained in the LISR. In this vein and as discussed in the section of the Federal Tax Code, it is proposed to eliminate the reduction in fines of 50% in terms of transfer prices, as well as to pay or guarantee the tax credits derived from reviews on this matter within 30 business days after notification of the resolution of the review by the Authority.
Federal Fiscal Code
The kay proposals of this section are as following:
- Amendments on the general anti-avoidance rule (GAAR) to broaden the scope of criminal consequences in fake transactions;
- Modification in the deadlines in the cancellation and temporary restriction of digital seal certificates;
- Not giving the return of balances in favor to non-located taxpayers;
- Keep the email or telephone number of the Federal Taxpayers Registry updated;
- Keep the accounting documentation for certain accounts for longer;
- Faculty of the tax authority to seize goods of foreign origin that if they do not prove their legal stay in national territory;
- The undue transmission of the right to reduce tax losses for criminal purposes will be considered a simulated act; and
- It is proposed to eliminate the 50% reduction in fines in the case of non-compliance with the tax provisions on transfer pricing.
Value-added tax (VAT)
- Professional medical services exempt from VAT, provided by individuals in authorized private assistance or charity institutions;
- Intermediation services aimed at the sale of used personal property;
- The option of digital intermediation platforms to publish the prices of goods and services without including the value-added tax expressly and separately;
- Temporary blocking of access by the provider of digital services for breach of an obligation; and
- Fines related to transfer prices and term adjustment.
