Disclosure of reportable schemes in Mexico

February, 2021

When are they disclosed?

As of 2021, the term begins for informing the tax authorities about those reportable schemes that generated a tax benefit during 2020. Such schemes must be disclosed within 30 days following the date on which the scheme is available to the taxpayer for implementation, or the first legal act or fact is performed that forms part of the scheme, whichever happens first; the limit date for their submittal is February 15, 2021.

Is there a minimum amount of the obligation to report?

It is important to point out that on February 2, 2021, the Ministry of the Treasury published the Decision in the Federal Official Gazette which defines the minimum amounts regarding the obligation to disclose reportable schemes. Such decision mentions that those personalized schemes that generate a tax benefit less than MXN $100,000,000 (one hundred million Mexican pesos) will not be reportable. Such decision also clarifies that this amount will apply to one or more schemes that can generate such benefit as a whole.

What is a scheme?

It is any plan, project, proposal, advice, instruction, or recommendation stated explicitly or tacitly with the aim of realizing a series of legal acts that, directly or indirectly, generate a tax benefit in Mexico.

What makes a scheme reportable?

In order for a scheme to be reportable, it has to meet one of the fourteen characteristics indicated in the applicable law, the most important of which are mentioned below:

• Transmission of tax losses
• Application of a tax   treaty with a country in which such transaction is not taxed for income tax or in the case of being taxed, such rate is less than the Mexican rate.
• The setting-up of a Permanent Establishment (PE) in Mexico is avoided (e.g. Maquiladoras).
• It avoids the application of 10% Income Tax on the payment of dividends. 

In the case that a scheme generates tax benefits and is not reportable as it is not covered by the aforementioned cases or a legal impediment exists, the obligation also exists to report it as non-reportable.

It should be noted that reportable schemes are generalized when they are commercialized in mass to all taxpayers or to a specific group and customized when they are designed according to the particular circumstances of a specific taxpayer.

Who is bound to report such schemes?

Tax advisors:

Individuals or legal entities who, in the normal running of their business, carry out tax consulting activities and who are responsible or involved in the design, commercialization, organization, implementation or management of a reportable scheme or who make a reportable scheme available to a third party for its implementation.

A certification must be given to the taxpayers in the case that any of the aforementioned activities has been performed and, as a consequence of such acts, the characteristics of a scheme are met, but it does not meet the requirement of being reportable.

The taxpayer:

When the tax advisor does not provide the identification number of the reportable scheme or the certification of a non-reportable scheme to the taxpayer.

When such reportable scheme has been designed, organized, implemented, and managed by the taxpayer.

When the tax advisor is a foreign resident (FR) without a permanent establishment in Mexico.

When an agreement exists between the tax advisor and the taxpayer.

How is it filed?

Using the application of the Tax Administration Service (SAT); different information should be reported using this application, such as:

• Data of the individual or legal entity reporting the scheme as advisor or as the taxpayer; in the case of legal entities, the data of the legal representative will also be requested.
• Specific information about the scheme.
• Description of the applicable legal grounds.
• Tax benefit, amount of the payment of the reduced, eliminated, or deferred tax.
• In addition, in .pdf format, information should be attached related to the transaction to be reported, including, among other things, a flowchart of the transaction, background and conclusions that form part of the scheme; it is important to mention that the requirements may vary according to the type of scheme.

Points to take into account

The publication of the miscellaneous tax regulations for 2021 included the information to be attached to the informative reportable schemes tax return. Such information refers to that Maquiladoras and those foreign residents who render services related to the hydrocarbons sector and who are in Mexico for a period less than 30 days, will fall under the case of avoiding the setting-up of a Permanent Establishment in Mexico and, consequently, will be bound to disclose such scheme. It is important to mention that the obligation would be of the Foreign Resident who would be avoiding the setting-up of the PE; however, if the company with which such transaction is performed is a related party, in this case the obligor would be the Mexican company or its advisor.

In any case, we suggest making an in-depth analysis of the possible acts to be performed by the companies so as to define whether they are classified as reportable schemes or not, after which the party bound to report them would have to be determined.

If you have any doubts about this topic or require our support, please do not hesitate to contact Mazars.