On the 9th of December 2020, the economic package 2020 was published in the Diario Oficial de la Federación (Official journal of the federation), which includes the General Economic Policy Criteria, the Federal Revenue Law, the Federal Expenditure Budget, the Income Tax Law, the Value Added Tax Law or the Federal Fiscal Code, among others.
This reform involves changes for the companies and it would be applicable from 1st January 2020.
The highlights are mentioned as follows.
Income Tax
Permanent Establishment
When a person, who is not an independent agent, makes contracts or participates actively on behalf of the resident abroad, this would establish a reason to consider a permanent establishment. In other words, the foreign company would legally incorporate a company with all its tax obligations.
Interest Limitation
The interest deduction based on taxable income is limited to 30% of the updated taxable income. This regulation will allow the deduction of interests that are not considered within the next three fiscal years following the one in which they were earned. Deductible interests must exceed 20 million pesos.
Decrease Provisional Payment PTU (Participation of Employees in the benefit)
The option of decreasing the PTU paid in the year of the provisional payments from May to December in equal parts is established in the Law.
Withholding Tax from Benefits of Retirement Funds
The procedure is established for legal entities to withhold ISR (income tax) for the taxable income that a worker obtains at the time of termination of the labor relationship that comes from the retirement insurance sub-account.
Renting Of Scientific and Industrial Equipment
The lease of scientific, industrial and commercial equipment will be treated as royalties, applying the appropriate retention rates and obligations in operations with residents abroad.
E-commerce
Individuals who sell goods or provide services over the Internet through technological platforms are obliged to pay the tax through a retention table, which is compulsory for legal entities.
Non-deductibility REFIPRES (Tax Heavens)
It is proposed to not deduct payments made when the supplier is determined as a tax heaven unless it is accord at market value.
Value Added Tax
VAT Withholding to Labor Outsourcing
Business contracting outsourcing services must retain and declare the VAT caused in the contracting for those services.
Free Services
If a free service is performed that is generally taxed by VAT, this will be taxed at the time the service is provided.
Digital Services Abroad
Providing digital services by a resident abroad, as long as the final consumer is located in the national territory, it will be considered that the service must be taxed under the law of Value Added Tax. This payment will be made directly and if there is an intermediary through retention.
General Changes
Information about Relevant Operations
The obligation to submit this declaration is eliminated.
Cancellation of Digital Certificate in the Following Cases:
- When three statements are not submitted after one month in a row.
- When the taxpayer is considered not located by the tax revenue office.
- When CFDI´S are issued for non-existent operations.
- When income or withholdings do not match the CFDI´S (electronic invoice).
- If the tax mailbox contacts are not confirmed.
Universal Compensation
The elimination of compensation of balances on behalf of the tax payer is confirmed.
Option to Not Issue Tax Certificate of No Liabilities
In order to ensure that legal entities making payments to individuals and temporary use and enjoyment do not issue proof of withholdings if electronic invoice is made with withholdings.
Fiscal Incentives
There is a tax incentive for companies employing people with disabilities, with an additional deduction of 25%.
Electronic Signature
The revenue tax office may not grant the e-signature to companies that are not identified, or of which there is not enough information about their identity or the legal representative.
Tax Mailbox
Fines of up to MXN nine thousand two hundred are proposed to all those tax payers who do not have the mail active or located for notifications of the tax revenue office.
Electronic Notification
Any digital notification sent by tax mailbox will be enough for the initiation of the administrative act.
These legislative updates establish a challenging start of the year, which will undoubtedly have impacts for all organizations operating in Mexico.
In Auxadi we connect America with Europe, LATAM and Asia, providing value-added services to more than 1,000 clients in 50 jurisdictions. We want to help you and make everything easier for you. If you have any questions, please do not hesitate to contact us.
All information contained in this publication is up to date on 2019. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.